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A Balanced Portfolio Example in the SPP Integrated Market Larry Holloway Kansas Power Pool November 17, 2016
A Balanced Portfolio Example in the SPP Integrated Market
Larry Holloway
Kansas Power Pool
November 17, 2016
Generation Resource Planning in an Integrated Market• Traditional planning concepts
• Base Load
• Intermediate (Cycling) Resources
• Peaking Resources
• Changes in todays integrated market• Huge market penetration by intermittent resources that cannot be dispatched
• Wind today – tomorrow solar
• Low natural gas prices
• Pressure on traditional baseload coal and nuclear units
• Does dispatchability have additional value in today’s market?
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KPP Load in 2015 in MW
Traditional Planning
• Baseload – around 40% to 50% of peak load• Typically the lowest cost of energy units• Coal or Nuclear are prime examples• Hydro would be a good example in some parts of the country but here it is
usually reserved for peaking schedule due to limited availability
• Peaking – around 20% of peak load• Usually highest cost of energy units (except hydro)• Combustion turbines, internal combustion engines• Hydro due to limited schedule
• Intermediate – around 30% to 40% peak load• Normally moderately priced energy – often efficient gas fired units• Could also be older coal units – though these are difficult to dispatch and
follow load
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KPP Load in 2015 in MW
Peaking
Baseload
Intermediate
Recent Market Observations
• Influence of nondispatchable wind resources in the SPP Integrated Market affected the value of baseload resources
• Low natural gas prices tended to favor low cost gas units• This is particularly true if they can readily cycle on and off
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10/2/2016 0:00 10/3/2016 0:00 10/4/2016 0:00 10/5/2016 0:00 10/6/2016 0:00 10/7/2016 0:00 10/8/2016 0:00 10/9/2016 0:00
Wind Energy vs Load in SPP Footprint October 3 through October 7 2016(Values in MW)
Wind SPP Load
21,535 MW SPP Load3AM Last Night10,654 MW SPP Wind
KPP’s portfolio of Resources
• Baseload – 74.3 MW• 59 MW of Jeffrey Energy Center (participation contract)• 15.3 MW GRDA
• Intermediate – 62 MW• Dogwood Ownership share
• Peaking – about 152 MW• SPA and WAPA a little over 8 MW• City units around 150 MW
• Wind contracts – 37.5 MW• Greensburg 12.5 MW• Marshall 25 MW
Variable Costs of KPP Capacity Resources
• Variable Costs are Costs that differ depending on usage• Fuel costs• Water costs• Pollution control additives
• Scrubber limestone, etc• Ammonia for Selective Catalytic Recombiners (SCRs)
• KPP Resources are sold into the SPP IM• Revenue is generated from these sales• Energy sales revenue is compared to Variable costs
• Remember these resources also provide required capacity
• Thirteen month cost comparison
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Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16
KPP GRDA Resource PerformanceComparing Energy Cost to Market Payments in $/MWH
GRDA Variable Cost GRDA IM Revenue GRDA Revenue Minus Costs
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KPP Jeffrey Resource PerformanceComparing Energy Cost to Market Payments in $/MWH
Jeffrey Variable Cost Jeffrey IM Revenue Jeffrey Revenue Minus Costs
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KPP Dogwood Resource PerformanceComparing Energy Cost to Market Payments in $/MWH
Dogwood Variable Cost Dogwood IM Revenue Dogwood Revenue Minus Costs
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Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16
KPP SPA Resource PerformanceComparing Energy Cost to Market Payments in $/MWH
SPA Variable Cost SPA IM Revenue SPA Revenue Minus Costs
Observations
• The value of a diversified portfolio is even more evident when conditions change• Such as high wind and low natural gas prices
• Note: Wind and coal resources will be valuable with high natural gas prices
• In addition to other types of diversification the ability of resources to dispatch, cycle and follow market prices is more valuable today than in the past• You should consider this in addition to diversification among energy
resources, baseload, intermediate and peaking
Questions?
