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SouthwestPowerPool SPPorg southwest-power-poolHelping our members work together to keep the lights on... today and in the future. 1
2019 ANNUAL REPORT HIGHLIGHTSWITH SELECT HIGHLIGHTS FROM WINTER 2020 QUARTERLY REPORT
MAY 26, 2020
2MMU
ANNUAL REPORT OVERVIEW
3MMU
MARKETS COMPETITIVE OVERALL
• Low energy prices
• Low frequency of offer mitigation
• All frequently constrained areas removed
4MMU
MARKET DRIVERS
• Factors influencing prices higher:• Increased generation outages
• Factors influencing prices lower:• Lower gas prices• Increase in low-cost generation resources
5MMU
IMPORTANT ISSUES GOING FORWARD
• Price formation during emergency and scarcity conditions
• Incentives for resource adequacy capacity
• Proper reporting of outages
• Distortion of prices by self-committed generation
• Under-scheduling of wind resources in day-ahead
• Analyzing and addressing seams issues
6MMU
RECOMMENDATIONS – NEW
• Improve price formation during• Emergency conditions• Scarcity events
• Incentivize capacity performance
• Update and improve outage coordination methodology
7MMU
RECOMMENDATIONS – EXISTING • Enhance market efficiency
• Reduce need for self-commitment• Address under-scheduling of wind
• Increase flexibility• Develop an uncertainty product• Enhance commitment logic• Continue development of energy storage design
• Limit market power of changing parameters
• Enhance credit rules for known information
• Enhance ability to assess a range of transmission planning outcomes
8MMU
MARKET DRIVERS
9MMU
SPP GENERATION CAPACITY MIX
Coal26%
Gas, simple cycle26%
Wind25%
Gas, combined cycle15%
Hydro4%
Nuclear2%
Oil2%
Solar0% Other
0%
10MMU
LOAD DECREASED 0.5% IN 2019 COMPARED TO 2018
10
14
18
22
26
30
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
GW
h (t
hous
and
s)
2017 '18 '19
11MMU
SPP PRICES, AND GAS COSTS, DECREASED IN 2019
$0
$1
$2
$3
$4
$5
$0
$10
$20
$30
$40
$50
2014 2015 2016 2017 2018 2019
$/M
MB
tu
$/M
Wh
Day-ahead price Real-time price Panhandle Eastern Pipeline gas cost
12MMU
WIND CAPACITY ADDITIONS CONTINUE TO OUTPACE RETIREMENTS
0
600
1,200
1,800
2,400
2017 2018 2019 2017 2018 2019
Nam
epla
te c
apac
ity (M
W)
Coal Wind Hydro Gas Oil
retirements additions
13MMU
WIND CAPACITY AND GENERATION CONTINUED TO INCREASE
0
20,000
40,000
60,000
80,000
0
6
12
18
24
2014 2015 2016 2017 2018 2019
Gen
erat
ion
(GW
h)
Cap
acity
(GW
)
Dispatchable capacity Non-dispatchable capacity Wind generation
14MMU
GENERATION OUTAGES – SPECIFICALLY GAS, SIMPLE-CYCLE OUTAGES – INCREASED
0
30,000
60,000
90,000
2017 '18 '19 2017 '18 '19 2017 '18 '19 2017 '18 '19
Derate,forced
Derate,maintenance
Out-of-service,forced
Out-of-service,maintenance
Out
age
(GW
h)
Coal Gas, combined-cycle Gas, simple-cycle Hydro Nuclear Oil Other Renewable Wind
15MMU
SELF-COMMITTED START-UP INSTRUCTIONS DOWN2017 2018 2019
Day-ahead market 68% 74% 75%Self-commitment 15% 11% 8%Intra-day RUC 8% 7% 7%Manual, regional reliability 4% 5% 7%Short-term RUC 2% 3% 2%Day-ahead RUC <1% <1% <1%Manual, local reliability 1% 1% 1%
Starts 28,160 35,328 33,643
16MMU
MARKET PERFORMANCE
17MMU
ALL-IN COSTS WERE DOWN 12 PERCENT AND WERE DRIVEN BY ENERGY COSTS
$0
$1
$2
$3
$4
$0
$10
$20
$30
$40
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Nat
ural
gas
co
st ($
/mm
Btu
)
All-
in p
rice
($/M
Wh)
Energy (LMP) Reserves Day-ahead MWP Real-time MWP Gas PEPL
18MMU
FREQUENCY OF REAL-TIME NEGATIVE PRICES INCREASED IN ALL HOURS IN REAL-TIME
0%
3%
6%
9%
12%
15%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Perc
ent n
egat
ive
pri
ce in
terv
als
LMP −$0.01 to −$25.00 LMP −$25.01 to −$50.00 LMP less than −$50.00
19MMU
MARKET REVENUE INSUFFICIENT TO SUPPORT NEW GENERATION
Technology
Average marginal
cost ($/MWh)
Net revenue from SPP market
($/MW yr.)
Annual revenue
requirement ($/MW
yr.)
Able to recover
new entry cost
Annual fixed
O&M cost($/MW
yr.)
Able to recover
avoidable cost
Scrubbed coal $28.89 $18,170 $801,540 NO $83,750 NO
Advanced gas/oil combined-cycle $24.43 $76,898 $110,007 NO $10,300 YES
Advanced combustion turbine $41.69 $20,157 $93,783 NO $7,010 YES
Wind -$30.00 $178,165 $252,355 NO $48,420 YES
Solar $0.00 $69,196 $195,541 NO $22,460 YES
20MMU
WIND AND COAL GENERATION TRENDING IN OPPOSITE DIRECTIONS
0%
10%
20%
30%
40%
50%
60%
70%
2014 2015 2016 2017 2018 2019
Perc
ent o
f to
tal g
ener
atio
n
Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear
21MMU
WIND GENERATION OUTPACED COAL GENERATION IN APRIL AND OCTOBER
0%
10%
20%
30%
40%
50%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Perc
ent o
f to
tal g
ener
atio
n
Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear
22MMU
VIRTUAL TRANSACTIONS CONTINUE TO GROW STEADILY
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Ave
rag
e ho
urly
vo
lum
e (M
W)
Cleared bids < $30/MWh Cleared offers < $30/MWhCleared bids > $30/MWh Cleared offers > $30/MWhUncleared bids Uncleared offersNet cleared
23MMU
SPP EXPERIENCED FIRST CONSERVATIVE OPERATIONS SINCE START OF INTEGRATED MARKETPLACE• February 7-9 (cold weather, icing impacts) • March 3-5 (cold weather, icing impacts, gas supply concerns) • May 29-June 1 (generation outages, low wind, increasing load) • June 4-7 (generation outages, low wind, summer load) • July 1-3 (generation outages, low wind, summer load) • July 10-17 (generation outages, high load) • August 6-8 (generation outages, high load, low wind, EEA 1) • August 12-13 (high load, low wind, hot weather) • August 20-21 (high load, hot weather) • September 5-7 (generation outages, high load, low wind)
24MMU
PRICES DURING EEA 1 DID NOT REFLECT EMERGENCY CONDITIONS
$0
$300
$600
$900
$1,200
$1,500
8:00
9:00
10:0
0
11:0
0
12:0
0
13:0
0
14:0
0
14:3
0
15:0
0
15:3
0
16:0
0
17:0
0
18:0
0
19:0
0
20:0
0Mar
gin
al e
nerg
y co
mp
one
nt ($
/MW
h)
Marginal energy component
EEA1Conservative operations
25MMU
CONGESTION
26MMU
CONGESTION HAS SHIFTED TO THE SOUTHEAST
27MMU
FREQUENTLY CONSTRAINED AREAS CHANGING AS CONGESTION SHIFTS
Day-aheadmarginal congestion
component
Central Kansas2018 study addition2019 study removal
Southwest Missouri2018 study addition 2019 study removal
28MMU
MARKET-TO-MARKET PAYMENTS INCREASED
-$14
-$7
$0
$7
$14
$21
$28
$35
-$6
-$4
-$2
$0
$2
$4
$6
$8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Mill
ions
Mill
ions
Payments from MISO to SPP Payments from SPP to MISO Net payments
Total
29MMU
TRANSMISSION CONGESTION AND AUCTION REVENUE RIGHT FUNDING
0%
20%
40%
60%
80%
100%
-$200
$0
$200
$400
$600
$800
2017 2018 2019
Fund
ing
per
cent
Mill
ions
TCR funding
Day-ahead revenue Transmission congestion right fundingSurplus/shortfallFunding percent
0%
40%
80%
120%
160%
200%
$0
$100
$200
$300
$400
$500
2017 2018 2019
Fund
ing
per
cent
Mill
ions
ARR funding
Transmission congestion right revenue Auction revenue right funding Surplus/shortfallFunding percent
30MMU
MARKET EFFICIENCY
31MMU
DAY-AHEAD MAKE-WHOLE PAYMENTS INCREASED BY 16 PERCENT
$0
$2
$4
$6
$8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mill
ions
Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other
$0
$10
$20
$30
$40
2017 '18 '19
Mill
ions
Total
32MMU
REAL-TIME MAKE-WHOLE PAYMENTS INCREASED BY ALMOST 55 PERCENT
$0
$2
$4
$6
$8
$10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mill
ions
Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other
$0
$15
$30
$45
$60
$75
2017 '18 '19
Mill
ions
Total
33MMU
SCARCITY EVENTS INCREASED IN 2019
$0
$250
$500
$750
$1,000
0
50
100
150
200
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Mar
gin
al e
nerg
y co
st ($
/MW
h)
Scar
city
inte
rval
s
Operating reserve scarcity Regulation-down scarcity Regulation-up scarcityOperating reserve scarcity price Regulation-down scarcity price Regulation-up scarcity price
34MMU
REAL-TIME PRICE VOLATILITY UP, BUT DAY-AHEAD VOLATILITY DOWN
0
20
40
60
80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Vo
latil
ity (s
tand
ard
dev
iatio
n)
real-time volatility day-ahead volatility
35MMU
WIND NOT IN DAY-AHEAD MARKET DRIVING PRICE DIVERGENCE
Wind
Net virtual supply (day-ahead)
RUC/manual committed
Self-committed after day-ahead market
Import increase
0
400
800
1,200
1,600
2,000
2,400
Additional energy Reductions
MW
h
Net additional real-time supply
36MMU
UNDER-SCHEDULING OF WIND IN DAY-AHEAD MARKET CAN CONTRIBUTE TO DISTORTED PRICE SIGNALS
84%
88%
92%
96%
100%
0
2,000
4,000
6,000
8,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Day
-ahe
ad p
erce
nt c
lear
ed
GW
h
Day-ahead offered GWh Day-ahead cleared GWhWind forecast Day-ahead percent cleared
37MMU
FREQUENCY OF MITIGATION REMAINED LOW
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Perc
ent o
f res
our
ce
hour
s m
itig
ated
Day-ahead
Energy Operating reserve No-load
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Perc
ent o
f res
our
ce
hour
s m
itig
ated
Real-time
38MMU
MITIGATION OF START-UP OFFERS WAS FLAT, BUT REMAINED LOW
0%
2%
4%
6%
8%
10%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19
Perc
ent o
f sta
rt-u
p o
ffers
miti
gat
ed
Day-ahead Reliability unit commitment Manual
39MMU
MARKET CONCENTRATION INCREASED INTO THE MODERATE ZONE WITH THE EVERGY MERGER
0
500
1,000
1,500
2,000
Her
find
ahl-H
irsc
hman
Ind
ex
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Unconcentrated
Moderately concentrated
Highly concentrated
40MMU
AVERAGE ANNUAL OFFER PRICE MARKUP NEGATIVE FOR ON-PEAK AND OFF-PEAK
-$20
-$16
-$12
-$8
-$4
$0
$4
2017 2018 2019 2017 2018 2019
Off-peak On-peak
Offe
r pri
ce m
arg
inal
co
st m
arku
p ($
/MW
h)
High Average Low
41MMU
QUESTIONS?
42MMU
WINTER 2020 QUARTERLYSTATE OF THE MARKETREPORT
43MMU
COAL GENERATION CONTINUES TO DROP, WHILE WIND & GAS GENERATION CLIMBS
0%
10%
20%
30%
40%
50%
Dec18
Jan19
Feb19
Mar19
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct19
Nov19
Dec19
Jan20
Feb20
2018 '19 '20
Nuclear Wind Coal Gas, combined cycle Gas, simple cycle
Winter
44MMU
MARKET COMMITMENTS UP, WHILE SELF-COMMITMENTS DOWN
0%
20%
40%
60%
80%
Dec18
Jan19
Feb19
Mar19
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct19
Nov19
Dec19
Jan20
Feb20
2018 '19 '20
Market Self OutageWinter
45MMU
GENERATION OUTAGES ARE DOWN
0
10,000
20,000
30,000
40,000
Sep18
Oct18
Nov18
Dec18
Jan19
Feb19
Mar19
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct19
Nov19
Dec19
Jan20
Feb20
2018 '19 '20
GW
h
Coal Gas, CC Gas, SC Hydro Nuclear Oil Other Renewable WindWinter total
46MMU
ENERGY PRICES AND GAS COSTS CONTINUE TO DECLINE
$0
$1
$2
$3
$4
$0
$10
$20
$30
$40
Dec18
Jan19
Feb19
Mar19
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct19
Nov19
Dec19
Jan20
Feb20
2018 '19 '20
Gas
pri
ce ($
/MM
Btu
)
LMP
($/M
Wh)
Day-ahead price Real-time price Gas cost
Winter
47MMU
HIGHEST PRICES AND CONGESTION IN SOUTHEAST CORNER OF FOOTPRINT
48MMU
QUESTIONS/COMMENTSgwarren@spp.org501-614-3235
or
SPPMarketMonitoring@spp.org