2009 State of the Market Report
Spinning reserve prices averaged approximately $3.25 per MWh in 2009. These prices were very stable at levels consistent with both our expectations based on the costs of providing spinning reserves and prices in other RTO markets. Spinning reserve prices were slightly higher in the spring of 2009 due to higher levels of shortages. Spinning reserve and regulation shortages occurred at a moderate frequency in 2009. These shortages are evaluated later in this section.
Finally, supplemental reserves cleared at an average price of $0.51 per MWh for the year. The low price for this product is expected because the balance of the operating reserve requirements that are not spinning reserves can be satisfied either by spinning reserve resources or offline peaking resources. Offline resources can generally supply these reserves at minimal cost. However, prices rose in August through October to an average of $1.10 per MWh because there were 15 intervals of operating reserve shortages. Total operating reserves are the most valuable class of reserves because a shortage of total operating reserves has the biggest potential impact on reliability. Therefore, total operating reserves have the highest reserve demand curve and supplemental reserve prices during the shortage intervals averaged $1,100 per MWh. As the surplus of generating capability dissipates in the Midwest ISO region, an increasing frequency of operating reserve shortages will play a key role in providing the long-term economic signals to invest in new resources.
Our next analysis examines the real-time offer prices and quantities of the ASM products. The average regulation capability was over 1,800 MW in 2009. This is less than other operating reserves because it is limited to five minutes of bi-directional ramp capability, whereas spinning reserve is 10 minutes. In addition, only a limited number of resources are qualified to provide regulation. Our analysis is shown in Figure 31 and Figure 32. In the figures, the solid segments of the bars show the capability that is available to be scheduled on a five-minute basis, while the hatched segments represent capability that cannot be scheduled.