The Holy Grail and Locational Marginal Pricing
If you think Locational Marginal Pricing (LMP) is as mysterious as finding the Holy Grail, the energy market services team at CMPAS can help you make sense of it all. The term LMP refers to the price of energy, and Chad Hanson, Ben Nelson, and Andy Ristau work like “Knights of the Round Table” interacting with the Midcontinent Independent System Operator (MISO) to schedule energy and load in the marketplace for CMPAS members and affiliates.
As the regional transmission organization, MISO functionally controls the system and administers the sale of electricity for Day-Ahead, Real-Time, and other ancillary markets. To determine the LMP, MISO monitors thousands of pricing nodes that exist as grid interconnection points for the continual movement of power. At the node, MISO balances supply and demand every second to preserve reliable customer service.
Price contour maps, shown below, indicate how circumstances impact prices at the node throughout the MISO footprint.
The shaded blue map shows an efficient market with relatively stable pricing. Meanwhile, the predominantly orange map indicates locations of high and low prices. During this particular period, the temperature caused high demand that triggered high prices in the shaded orange areas. However, in North Dakota, excess wind generation and a constrained transmission line caused extremely low (negative) regional prices because excess power could not move to where it was needed.
Depending on the availability and the movement of power, prices can swing hourly by thousands of dollars. Conditions such as high demand, generator or transmission line outages, and other system anomalies can impact market pricing.
As MISO manages power flows and pricing on the transmission grid, the CMPAS energy services team interfaces with MISO as the designated Market Participant and Load Serving Entity to schedule energy for members and affiliates in the day-ahead and real-time markets. Chad, Andy, and Ben manage the details of power supply contracts, generation and capacity resources, financial transmission and auction revenue rights, seasonal arrangements, and other transactions. The Energy Services team also conducts capacity accreditation, invoice settlements, load forecasting, congestion hedging, tariff recovery, and other services.
The CMPAS team offers utilities valuable knowledge and analyses to manage risk and maximize a utility’s resources. If your utility seeks energy market expertise with regional transmission organizations, contact CMPAS.
If you have any questions about LMP, don’t hesitate to reach out to our team!
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