EMFC Addresses Head-on the Tectonic Industry Changes

With record attendance in one of the most iconic tourist destinations in the world, the 20th Annual Electric Market Forecasting Conference (EMFC) took place September 6-8 in Las Vegas, NV. This industry-leading conference assembled top-notch speakers and gave an exclusive networking experience to attendees from start to finish.

The pre-conference day featured in-depth sessions designed to maximize the value of the Aurora software for its users. Advanced sessions included discussions on resource modeling and improving model productivity, recent database enhancements including the disaggregation of U.S. resources, an update on the nodal capability and data, and other model enhancements.

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Michael Soni, Economist, Support | EPIS

Before the afternoon Users’ Group meeting started, EPIS announced that it was dropping “xmp” from the name of its flagship product to purely Aurora, and unveiled a fresh logo. Ben Thompson, CEO of EPIS said, “The new logo reflects our core principles of being solid and dependable, of continuously improving speed and performance, and of our commitment to helping our customers be successful well into this more complex future.”

That evening, attendees kicked-off the main conference with a night under the stars at Eldorado Canyon for drinks, a BBQ dinner and a tour of the Techatticup Mine; the oldest, richest and most famous gold mine in Southern Nevada.


Eldorado Canyon, Techatticup Mine

On Thursday, thought leaders from across the industry presented various perspectives on the complex implications that recent industry changes will have on grid operations, future planning and investments. The forum session opened with Arne Olson, a partner with E3 Consulting in San Francisco, discussing California’s proposed legislation SB-100, which aimed to mandate that 100% of California’s energy must be met by renewable sources by 2045, along with the bill’s implications for Western power markets and systems. He pointed out that SB-32, last year’s expansion of earlier legislation, which mandates a 40% reduction in GHG emissions (below the 1990 levels by 2030), is actually more binding than SB-100. He explained the economics of negative prices, why solar output will be increasingly curtailed and posited that CAISO’s famous “duck curve” is becoming more an economic issue vs. the reliability issue it was originally intended to illustrate.

Other Thursday morning presentations included “The Rise of Utility-Scale Storage: past, present, and future” by Cody Hill, energy storage manager for IPP LS Power, who outlined the advances in utility-scale lithium ion batteries, and their expected contributions to reserves as well as energy; Masood Parvania, Ph.D., professor of electrical and computer engineering at the University of Utah, who described recent advances in continuous-time operation and pricing models that more accurately capture and compensate for the fast-ramping capability of demand response (DR) and energy storage device; and Mahesh Morjaria, Ph.D., vice president of PV systems for First Solar who discussed innovations in PV solar module technology, plant capabilities and integration with storage.

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Masood Parvania, Ph.D., Director – Utah Smart Energy Lab | The University of Utah

The afternoon proceeded with Mark Cook, general manager of Hoover Dam, who gave a fascinating glimpse into the operations and improvements of one of the most iconic sources of hydro power in the country; and concluded with Lee Alter, senior resource planning analyst and policy expert for Tucson Electric Power, who shared some of the challenges and lessons learned in integrating renewables at a mid-sized utility.

Networking continued Thursday afternoon with a few of the unique opportunities Las Vegas offers. In smaller groups attendees were able to better connect with each other while enjoying one of three options which included a delicious foodie tour, swinging clubs at TopGolf, or solving a mystery at the Mob Museum.

The final day of the conference was devoted to giving Aurora clients the opportunity to see how their peers are using the software to solve complex power market issues. It featured practical discussions on how to model battery storage, ancillary services, the integration of renewables and an analysis of the impact of clean energy policies all while using Aurora.

The conference adjourned and attendees headed out for a special tour of the Hoover Dam which included a comprehensive view of the massive dam and its operations, and highlighted many of the unique features around the site.

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Hoover Dam, Power Plant Tour

The EMFC is a once-a-year opportunity for industry professionals. The 20th Annual EMFC addressed head-on the tectonic industry changes (occurring and expected) from deep renewable penetration, advances in storage technologies, and greater uncertainty. Join EPIS next year for the 21st Annual EMFC!

For more information on the 2017 speakers, please visit http://epis.com/events/2017-emfc/speakers.html
To obtain a copy of any or all of the presentations from this year’s EMFC, Aurora clients can go to EPIS’s Knowledge Base website using their login credentials here. If you do not have login credentials, please email info@epis.com to request copies.

Filed under: Events, UncategorizedTagged with: , , , , ,

Living in the Past?

Living in the past is not healthy. Is your database up-to-date? EPIS just launched the latest update to the North American Database, version 2016_v4, marking the fourth North American data update this year! Recent changes in the power industry present challenges to database management which will be discussed in this post.

In general, the transformation in power generation sources in the U.S. coupled with evolving electricity demand and grid management represents a paradigm shift in the power sector. In order to accurately model power prices in the midst of such change, one must have a model built on fundamentals and a database that is up-to-date, has reasonable assumptions, is transparent and is flexible. A recent post described the technical side of working with databases in power modeling. This entry outlines important changes in the East Interconnect, the impacts those changes have on data assumptions and configuration and the steps we are taking to provide excellent databases to our clients.

Recent shifts in power generation sources challenge database assumptions and management. New plant construction and generation in the U.S. are heavily weighted towards renewables, mostly wind and solar and as a result, record generation from renewables has been reported across the East Interconnect. Specifically, on April 6, 2016, the Southwest Power Pool (SPP) set the record for wind penetration:

Record Wind Penetration Levels 2015

Figure 1. Record wind penetration levels in Eastern ISOs compared with average penetration in 2015. SPP holds the record which was reported on April 6, 2016. Record sources: NYISO, SPP, MISO, ISO-NE, PJM. 2015 Averages compiled from ISO reports, for example: NYISO, SPP, MISO, ISO-NE, PJM. *Average 2015 generation used to calculate penetration.

Similarly, the New York City area reached a milestone of over 100 MW in installed solar distributed resources. Accompanying the increase in renewables are increases in natural gas generation and reductions in coal generation. In ISO-NE, natural gas production has increased 34 percent and coal has decreased 14 percent since 2000, as highlighted in their 2016 Regional Electricity Outlook. These rapid changes in power generation sources require frequent and rigorous database updates.

Continued electric grid management changes in the East Interconnect also requires flexibility in databases. One recent change in grid management was the Integrated System joining the Southwest Power Pool, resulting in Western Area Power Administration’s Heartland Consumers Power District, Basin Electric Power Cooperative and Upper Great Plains Region joining the RTO. The full operational control changed on October 1, 2015, thus expanding SPPs footprint to 14 states, increasing load by approximately 10 percent and tripling hydro capacity. Grid management change is not new, with the integration of MISO South in 2013 as an example. Changes such as these require flexibility in data configuration that allow for easy restructuring of areas, systems and transmission connections.

Variability in parameters, such as fuel prices and demand, introduce further difficulty in modeling power markets. The so called “Polar Vortex” weather phenomena shocked North Eastern power markets in the winter of 2013/2014 with cold temperatures and high natural gas prices resulting in average January 2014 energy prices exceeding $180/MWh in ISO-NE. It seemed like the polar opposite situation occurred this last winter. December 2015 was the mildest since 1960, and together with low natural gas prices, the average wholesale power price hit a 13-year low at $21/MW. The trend continued into Q1 of 2016:

Monthly average power price in ISO-NE Q1 2014 and 2016

Figure 2. Monthly average power price in ISO-NE in Q1 2014 and 2016. Variability between years is a result of high natural gas prices and cold weather in 2014 versus low natural gas prices and mild weather in 2016.

Whether extreme events, evolving demand or volatile markets, capturing uncertainty in power modeling databases is challenging. In AURORAxmp, users can go one step further by performing risk simulations; specifying parameters such as fuel prices and demand to vary across a range of simulations. This is a very powerful approach to understanding the implications of uncertainty within the input data.

The aforementioned changes in generation, grid management and demand, offer exciting new challenges to test power market models and data assumptions. To test our platform, EPIS performs a historical analysis as a part of each database release. Inputs of historical demand and fuel prices are used to ensure basic drivers are captured and model output is evaluated not only in terms of capacity, but monthly generation, fuel usage and power prices. The result of this process is a default database that is accurate, current, contains reasonable assumptions, is transparent and is flexible to ensure you have the proper starting point for analysis and a springboard for success.

With the release of North_American_DB_2016_v4, EPIS continues to provide clients with superb data for rigorous power modelling. The 2016_v4 update focuses on the East Interconnect and includes updates to demand, fuels, resources, DSM and other miscellaneous items. Clients can login to our support site now to download the database and full release notes. Other interested parties can contact us for more information.

Filed under: Data Management, Power Market InsightsTagged with: , , , , , ,

Integrated Modeling of Natural Gas & Power

Natural gas (NG) and electric power markets are becoming increasingly intertwined. The clean burning nature of NG, not to mention its low cost due to increases in discovery and extraction technologies over the past several years, has made it a very popular fuel for the generation of electricity. As a result, the power sector is consistently the largest NG consumer. For example, in 2014, 30.5% of the total NG consumption in the United States was used for the generation of electricity (Figure 1).


Figure 1: U.S. Natural Gas Consumption by Sector, 2014. Source

According to EIA’s Annual Energy Outlook (AEO) 2015 projections,

“…natural gas fuels more than 60% of the new generation needed from 2025 to 2040, and growth in generation from renewable energy supplies most of the remainder. Generation from coal and nuclear energy remains fairly flat, as high utilization rates at existing units and high capital costs and long lead times for new units mitigate growth in nuclear and coal-fired generation.”

Economic, environmental and technological changes have helped NG begin to displace coal from its dominant position in power production. Although it was just for a single month, NG surpassed coal for the first time as the most used fuel for electricity generation in April 2015. The EIA also notes that considerable variation in the fuel mix can occur when fuel prices or economic conditions differ from those in the AEO 2015 reference case. The AEO reference case assumes adoption of the Environmental Protection Agency’s (EPA) implementation of Mercury and Air Toxics Standard (MATS) in 2016, but not the Clean Power Plan (CPP). Adoption of CPP, along with favorable market forces, could change the projections of the AEO 2015 reference case significantly. There is a consensus within both NG and power industry that NG-fired power generation will likely increase with the adoption of CPP.

Quantifying such a trend is non-trivial, but is crucial for stakeholders and regulators in both gas and power markets to fully understand what the future holds. Proper accounting of the interdependencies between NG and power markets is integral to the quality of any long-term predictions. Approaches for modelling an integrated NG-power capacity expansion that account for economics and market operations is the key to the most effective analysis.

The issue of gas-power integration has been a topic of active interest in the industry, and that interest is increasing. For example, the East Interconnect Planning Collaborative coordinated a major study in 2013 – 2014 to evaluate the capability of NG infrastructure to: satisfy the needs of electric generation, identify contingencies that could impact reliability in both directions and review dual-fuel capability. Likewise, the notorious “polar vortex” during the winter of 2013-2014 caused unusually cold weather in the New England region, which “tested the ability of gas-fired generators to access fuel supplies,” and caused ISO-NE and others to acknowledge the need to further investigate the issues affecting synchronization between gas and electric systems. More recently, companies like PIRA Energy are sharpening their focus on the interdependencies between gas and electric power.

There is a need for new and improved modeling approaches that realistically consider this growing gas-power market integration. An even greater need is to integrate the modeling of these markets in a way that is both efficient and practical for the end user, and still able to produce commercially viable results. EPIS has extensively tested interfacing AURORAxmp with GPCM, a calibrated NG model developed by RBAC, Inc. Several organizations and agencies have found this approach successful. Utilizing the two models allows us to develop projections for endogenously derived capacity additions (in both electric generation expansion and gas-pipeline expansion), electricity pricing, gas usage and pricing, etc. which are consistent between the two markets. This consistency leads to greater insight and confidence to aid decision-makers.

Figure 2: Abstract representation of integrated NG-power modeling using AURORAxmp and GPCM..

Although the industry is now anxiously waiting for the judiciary to weigh in on the legality of CPP regulations, there is a consensus that some form of carbon emission regulation will likely be in effect in the near future. Some states, such as Colorado, have already undertaken several regulatory initiatives and may implement a state-level CPP-like emissions regulation even if the federal plan is vacated by the courts.

As part of our ongoing research on the topic of gas-power modeling, we have designed and executed a series of test scenarios comparing the standard calibrated cases of AURORAxmp and GPCM against a potential implementation of CPP. If the proposed form of CPP is upheld in the courts, states have a number of implementation options. At this early stage, there has been no good evidence to indicate that one option would be more popular over another. This necessitated we make some broad assumptions in our experimental gas-power integration process. In our test scenarios, we assumed that all states would adopt the mass-based goal with new resource complement option.

An integrated gas-power framework allows us to better understand the most probable direction for the two markets. Our integrated GPCM-AURORAxmp CPP test scenario for the Eastern Interconnect took 7 iterations to converge to a common solution that satisfied both markets. By comparing resulting capacity expansions, fuel share changes, and gas prices between the starting point (Iteration 0) and ending point (Iteration 6) we get a sense of how the markets will coevolve.

Starting capacity expansion in the Eastern Interconnect for GPCM-AURORAxmp model.

Figure 3: Starting capacity expansion in the Eastern Interconnect for GPCM-AURORAxmp model.

Figure 3 shows the capacity expansion resulting from Iteration 0, the starting point of the integrated iterations. Iteration 0 is essentially a standalone power model with no regard for the impact the capacity expansion would have on the gas market. Figure 4 shows the capacity expansion after Iteration 6.

Resulting capacity expansion in the Eastern Interconnect for GPCM-AURORAxmp model.

Figure 4: Resulting capacity expansion in the Eastern Interconnect for GPCM-AURORAxmp model.

The convergent prices of NG were lower for Iteration 6 than Iteration 0 at all major gas hubs. Figure 5 shows the monthly prices at Henry Hub for both the iterations. The lower gas prices are unintuitive, but plausible. The combined gas-power sector has several market forces that are interdependent. We are currently working with gas experts to understand some of the mechanisms that could lead to lower gas prices. We hypothesize that our accounting for capacity expansion in both the markets is one of the drivers for this behaviors and our findings will be reported in a future publication.

Comparison of starting and ending price trajectories with integrated GPCM-AURORAxmp model.

Figure 5: Comparison of starting and ending price trajectories with integrated GPCM-AURORAxmp model.

The lower gas prices highlight one of the key benefits of integrated gas-power models. Standalone modeling frameworks are likely to misrepresent the impact of the complex cross-market mechanisms. Integrated models avoid this particular pitfall by explicitly modeling each market and is a more apt tool for evaluating policies such the CPP. AURORAxmp provides the capability to model any of the implementation plans that states might adopt in the future – rate-based, mass-based, emission trading schemes and so forth. The ability to interface with widely used NG models, such as GPCM, provides a convenient option for analysts to confidently navigate the highly uncertain future of intertwined NG and power markets.

Filed under: Clean Power Plan, Natural GasTagged with: , , ,