2009 State of the Market Report
Commitment process performed after the close of the day-ahead market. Inaccurate forecasts can cause the Midwest ISO to commit unnecessary resources or to not commit sufficient resources to meet demand, both of which can be costly. Some participants in the day-ahead scheduling and bidding processes may also rely on day-ahead forecasts.
The day-ahead forecast of peak load was on average 0.6 percent greater than real-time peak load. This indicates that the forecasting was relatively accurate. The average peak load forecast error
the magnitude of the error, regardless of direction – was 1.9 percent in 2009. This is slightly
higher than the 1.5 percent observed in 2008, but lower than the 2.2 percent error in 2007. The result is comparable to the performance of other RTOs. Consistent with the prior two years, the figure shows the load tended to be over-forecasted in the summer and under-forecasted in the fall. The magnitude of this seasonal bias increased in the summer of 2009 due to an unexpectedly cool summer, but decreased in the winter. The Midwest ISO is working to identify the source of this bias.
Real-Time Market Performance
In this subsection, we evaluate real-time market outcomes. The real-time market is important because its outcomes directly affect day-ahead outcomes. Energy purchased in the day-ahead market (and other forward markets) is priced based on expectations of future prices in the real- time markets. Therefore, higher real-time prices will lead to higher day-ahead and other forward market prices. Because forward purchasing is a primary risk-management tool for participants, increased volatility in the real-time market also leads to higher forward prices by potentially raising risk premiums in the day-ahead market.
Real-Time Prices and Load
We begin this subsection by providing an overview of daily average real-time energy prices during peak hours, along with the corresponding actual load, in Figure 25 below.