Year of the Comeback

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2016 California Market Hydropower Comeback

With Super Bowl 50 right around the corner, we remember one of the most thrilling comeback’s in NFL history: “The Catch” by 49er’s Dwight Clark, from Joe Montana, in the back of the end zone with less than a minute on the clock and down by 6 points. That play secured the 1982 NFC title for the 49ers. How about the emotional return by tennis great Monica Seles to win a title in 1995 after having been stabbed? Or, recall the awe-inspiring Michael Phelps comeback victory in the Beijing 2008 Olympics’ 100 meter butterfly by 0.01 seconds, after Phelps had been 7th coming off the wall at the 50 meter mark?

Most of us love comebacks. They inspire us, give us a boost in daily life, and we see that adversity can be overcome. A good comeback victory offers hope, despite the difficulties that were passed through to achieve it.

There are many different types of comebacks. There are those in sports, as mentioned above, and there are others from personal or professional aspects of life. They can even occur in nature and different business sectors or markets.

Hydropower in California is one such comeback that is developing. After four long-drought-stricken years, and a corresponding drop in hydro generation, change is in the air…literally. El Niño is contributing to a good year for California’s hydro which will affect the entire state, but particularly CAISO. Adding to the enthusiasm, El Niño is predicted to continue to impact temperature and precipitation patterns through late spring to early summer, according to experts at the National Oceanic and Atmospheric Administration (NOAA) and National Weather Service. The effects of the recent precipitation patterns have lifted the statewide average of water content in snow to 113% of normal, with the northern Sierra Nevada at 124% of average for this time of year. Optimism is building, but more rain and snow are needed to end the drought – which could take more time than just one good year of precipitation.

For California’s power market, hydropower is an important source which can significantly influence power price. However, the power produced from hydro facilities fluctuates depending on the annual precipitation patterns, mountain snow pack, and temperatures just to name a few. The Northwest Power and Conservation Council mentions, in the Sixth Power Plan, how forecasts are affected by the pattern of spring rains and the associated run off. In 2011, before the drought, hydropower contributed 21.32% of California’s total system power – nearly 42,715 gigawatt-hours (GWh). This is more than 8.3% of California’s total system power (16,470 GWh) in 2014. If El Niño continues to positively impact the rain and snowfall in California, we should “… look out for some unusual energy flows,” according to Wood Mackenzie’s Jamie Brick.

As a comeback is in the works for California’s hydropower, analysis and modeling of the market must continue. AURORAxmp facilitates excellent scenario analysis and quickly models the impacts of water as adjustments are made to assumptions. For more information on modeling impacts of hydro or other projects, please contact us .

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Uncertainty for ERCOT Markets

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AURORAxmp data is ready to take on the unpredictable nature of ERCOT’s markets.

The ERCOT reserve margin is by no means certain in 2016. According to the latest NERC 2015 Long-Term Reliability Assessment, ERCOT is showing a healthy reserve in the summer of 2016. However, NERC and others have had a tendency to miss the target in regards to reserve margin in this region. Reviewing projections for the 2015 summer period, the NERC Summer Reliability Assessment showed anticipated reserves in ERCOT of 16.24%, and the final Seasonal Assessment of Resource Adequacy (SARA) from ERCOT agreed that the region was expected to have sufficient capacity to meet peak demands with a 14.26% margin. Interestingly, the final forecast was an abrupt change from the preliminary forecast issued only 2 months prior which anticipated an 11.45% margin, or a 2% shortfall of the NERC reference margin of 13.75%. According to the final report:

The ERCOT Region is expected to have sufficient installed generating capacity to serve forecasted peak demands in the upcoming summer season (June – September 2015)… The primary reason for this change is the summer weather forecast, which generally indicates milder conditions than the 12-year normal forecast used in the Preliminary Summer SARA. As a result, the demand forecast for summer has decreased…

However, a few months later, ERCOT announced in a press release that it experienced its highest peak demand on record, “For the first time in this grid operator’s history, hourly demand within the Electric Reliability Council of Texas (ERCOT) system today broke the 69,000 MW threshold…”. Days later, in another press release, ERCOT reported the record peak was broken again by over 800 MW. Ultimately ERCOT missed the mark in its final, more optimistic report, and this shows how volatile projections can be. Not to say that NERC, FERC, ISO or RTO assessments aren’t excellent tools for understanding some of the fundamentals of a market, it’s just important to remember how significantly reality can differ from constantly changing expectations and how important it is to do analysis around the key fundamental drivers.

Once again, ERCOT has released its latest demand forecast. Has it overstated its margin once again? That question is enough to make one pause. Compliance extensions filed in 2015 for over 5 GW of Mercury and Air Toxic Standards (MATS) forced retirements, expire in 2016. Will they all be compliant and stick around or were they just hoping to operate one more year before finally deciding to retire? A lot of unknowns, but certainly the situation in ERCOT could be much tighter than some of these assessments suggest. With so much going on in 2016 for ERCOT, this year could be a pretty wild ride.

We are in the midst of a large ERCOT update of resources and demand that will be coupled with the latest ERCOT nodal case. Our data is net up in supply, but this is accompanied by an increase in the demand forecast. We have also added demand response units to capture their paramount importance to proper modeling of the system.  This database release is due out in Q1 2016 and is ripe for 2016 summer analysis.  Couple this with AURORAxmp’s risk analysis and you’ll be prepared for the market’s uncertainties.

For additional information, please contact us

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Navigating Clean Power Plan Building Blocks

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The EPA’s recently published Clean Power Plan (CPP) has left many companies wondering how to correctly and thoroughly assess the impact of these rules on the market, as well as their future planning.  Energy market participants of all types are struggling to determine what analyses can best evaluate all the available options.  Will they need to comply with a rate-based or mass-based approach?  How will they implement all the pieces of the new legislation?  How will the market be impacted?

In addition to flexible modeling of both mass-based and rate-based constraints, AURORAxmp has all the tools required to model each of the CPP’s building blocks individually or in combination.

 

Navigating the Clean Power Plan with AURORAxmp

(percentages can be found on page 3 of document for CPP Final Rule)

Regardless of your position or what type of market participant you are, AURORAxmp can provide powerful flexibility that will allow you to generate plant-by-plant or fleet results at the state or regional level. AURORAxmp delivers unparalleled scenario management, exceptionally fast runtimes, collaborative project management, as well as automation in a single multi-functional platform.  Experts across North America have already been using AURORAxmp in CPP studies.

“EVA’s Power Market Advisory team has been using AURORAxmp to analyze multiple flavors of the Clean Power Plan for 18 months now and have had great success. The accuracy and flexibility of the built-in emission constraint logic combined with AURORAxmp’s speed and granularity help provide robust and comprehensive results that meet and exceed our clients’ expectations. Whether we’re assessing a state-level rate-based compliance strategy or a mass-based approach with interstate trading, AURORAxmp’s user interface allows us to perform a wide range of analyses with ease. Further, EPIS’s top-notch customer support team is always available to help us solve issues and discuss modeling techniques. They take our feedback seriously and work consistently to make model updates that help us better simulate the power sector.” – Rob Jennings, Analyst, Energy Ventures Analysis

For additional information, please contact us

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Power Market Insights

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Welcome to EPIS Power Market Insights

This blog is designed to provide a convenient medium and central location to publish and share time-sensitive content for those interested in the future of the power industry and items relevant to the modeling, forecasting, and analysis of it.

It will include news, commentary and citations of relevant studies, information on recent or upcoming events, and model and market insights. It is expected to include original content authored by EPIS as well as citations of and links to works published by others.

We welcome your comments and suggestions anytime.

We still plan to continuously update our AURORAxmp Help system as well as our website collection of tools, examples, and other knowledge base content for more detailed and specific information regarding the AURORAxmp application. To see if you qualify to obtain login credentials to access this content, please contact us.

 

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