APLUS Energy Investment Technology Consultancy€¦ · pipeline company is not eager to provide any...

APLUS Energy Investment Technology ConsultancyShort-term and mid-term price forecasting in Turkey

Istanbul Energy Day

September 08, 2015

APLUS ENERGY INVESTMENT TECHNOLOGY CONSULTANCY

CONTENT

1) FACTORS EFFECTING DAY AHEAD MARKET PRICE

2) SHORT & MID- TERM PRICE FORECAST METHODS

3) RESULTS


FACTORS AFFECTING THE DAY AHEAD MARKET PRICE Three main factors affecting the DAMP (Day Ahead Market Price) has been noted as;

Generation from Thermal Power Plants

Availability of Thermal Power Plants

Natural Gas Prices Factors affecting the “Generation from Thermal Power Plants” are listed below

Electricity Demando Economic developmentso Temperature effect

Generation from Hydropower Plantso Power plants to be commissionedo Rainfall (possible drought seasons)

Generation from Wind Power Plantso Power plants to be commissionedo Wind availability & temperature

3


FACTORS AFFECTING THE DAY AHEAD MARKET PRICE

Factors affecting the “Availability of Thermal Power Plants” are

Power plants to be commissioned

Temperature

Seasonality of maintenance periods Factors affecting the “Natural Gas Prices” are

Brent oil prices

USD exchange rate

Political matters (election schedule and etc.)

Gas supply issues (political and/or technical)

4


UNCERTAINTY OF MARKET PRICES 2014 started with low precipitation rates, even explained as severely dry by the Turkish State

Meteorological Service but the overall year stayed within the average precipitation rates. It is though, difficult to predict the same for year 2015.

The unpredictable nature of the meteorological conditions make forecasting efforts for renewable generation (especially hydropower generation) more difficult, leading to a higher uncertainty in price forecasts.

Although the year 2014 stayed within the average precipitation rates, the drought season in winter months resulted in a significant decrease in hydro generation. The hydro capacity factor in 2014 was 39% lower than the capacity factor in 2013.

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Source: www.dmi.gov.tr

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10%

20%

30%

40%

50%

60%

70%

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Febr

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April

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2011 2012 2013 2014


UNCERTAINTY OF MARKET PRICES

6

Can peak-demand reach (or exceed) 41,000 MW (act.43,289 MW) level due to above-normal temperatures in 2015 summer?

Columbia University’s International Research Institute for Climate and Society (IRI) predicts that Turkey will experience above-normal temperatures in 2015 summer and indicates the probability of this case as 70%.

A possible natural gas crisis in winter months due to low temperature?

There are no forecasts available until December 2015, therefore the uncertainty of a natural gas supply crisis is high, but the expectation in the market is high.

Kaynak: http://iri.columbia.edu/our-expertise/climate/forecasts/seasonal-climate-forecasts/


UNCERTAINTY OF MARKET PRICES A possible increase in price of natural gas in 2015?

BOTAŞ’ gas sales tariff sits around 322 USD/tcm including the special consumption tax.

Falling oil prices, a new agreement with Russia’s Gazprom (on February 26, 2015) to cut down the gas price by 10.25% indicate a possible decrease in the gas tariffs. However, since BOTAŞ is planning to recover its loss in previous years and pay back some of its debt, the gas pipeline company is not eager to provide any discount on the natural gas price.

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BOTAŞ is also suffering from a sharp increase in exchange rates in favor of US dollar, which sits at a rate of 3.03 against the Turkish lira, adding to the reasons why BOTAŞ is not willing to decrease its tariffs.

Source: http://www.indexmundi.com/commodities/?commodity=russian-natural-gas&months=60

300

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380

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nov.

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des.

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jan.

15

USD

/1,0

00 s

cm

Months

Russian Gas Price at German Border


UNCERTAINTY OF MARKET PRICES

Can there be a delay or earlier-than-expected commissioning in the new power plant investments in Turkish energy market?

The installed capacity development is a critical factor when providing price projections.

Any delay in commissioning date of a large-scale power plant can cause further uncertainty in price analysis. Likewise, any power plant becoming operational earlier than its planned commissioning date can affect prices.

Such cases were experienced when RWE’s Denizli power plant’s commissioning was delayed for some months, leading to a higher error rate in price projections. On the contrary, İzdemirEnerji’s Aliağa coal-fired power plant was commissioned earlier than expected.

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FACTORS AFFECTING THE DAY AHEAD MARKET PRICE

Similar examples affecting the DAMP are illustrated below:

* Temperature difference compared to season normal averages

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Thermal Generation Thermal Availability Natural Gas Price

Temperature in Winter*

Temperature in Summer*

Rainfall

New Investments

Natural Gas Price Increase

Economic Developments

FactorsDAMPParameter


CONTENT


2) PRICE FORECAST METHODS

3) RESULTS


PRICE FORECAST MODELS

11

There are numerous methods for Electricity Price Forecast Modelling. A fundamental model is the simulation of a spot market which works if there is

“sufficient, accurate and continuous” data source.

Fundamental Models

Statistical Models

Less Than 1 Month

More Than 1 Month


FUNDAMENTAL MODEL - PRICE FORECASTING METHODOLOGY The methodology of the long term

electricity price forecasting study has a complex and detailed structure

Includes various factors ranging from features of power plants to macroeconomic variables


SHORT TERM PRICE FORECASTING APLUS Enerji provides short term price forecasts by using three different methods

Artificial Neural

Networks

Artificial Neural

Networks

Expert SystemExpert System

SARIMA (Seasonal ARIMA)

SARIMA (Seasonal ARIMA)

Delta Model


COMPARISON OF FUNDAMENTAL MARKET MODEL vs. SHORT TERM

FUNDAMENTAL MARKET MODEL SHORT TERM FORECAST METHODSProvides forecasts for mid-long term Provides forecasts for short-term (<14

days)A comprehensive database and frequent update required

Relies on data from past few days, in close relation with the data profile

Applicable for investment decision-making process and portfolio management

Applicable for short-term electricity trading activities

Meteorological forecasts depend on the past years’ seasonality and subject to changes for a given year

Better meteorological forecasts used

Long-term forecast of generation from renewable power plants is less reliable due to assumptions made

Short-term forecast of generation from renewable power plants more reliable since it is derived from realized data within few days

Long term natural gas tariffs is less-predictable

Possible changes in natural gas tariffs is closely monitored


ELECTRICITY MARKET RISK MANAGEMENT

15

A probabilistic price forecasting approach enable the companies to improve their competitiveness in energy trading activities, to limit the risks and thus maximize the profits.

Vulnerability to Risks Uncertainty

Manual Entry

Expert Experiences

Risk Management

Decision Support System

Automation

Mathematical Models

+ Expert

Experiences



16

Monte Carlo simulator that allows the users to define and set intervals in the input parameters of a fundamental model and generate hourly probabilistic Price Forward Curve.

The required inputs for the simulation are: Demand forecast Availability of thermal power

plants Capacity factor of renewable

power plants Hydrology (incoming water

amount to hydro power plants) Natural gas price increase Commissioning dates of power

plants Probabilistic Price Forward CurveProbabilistic Price Forward Curve

Monte CarloMonte Carlo

Fundamental ModelFundamental Model

Sufficient, Accurate and Continuous Data Flow (SACDF)

Sufficient, Accurate and Continuous Data Flow (SACDF)



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The Monte Carlo simulation considers all inputs entered by the user.

Then it runs at least 400 times and generate hourly probabilistic Price Forward Curve.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

TL/M

Wh

Hours

Mean Lower Limit Upper Limit Actual


CONTENT


2) PRICE FORECAST METHODS

3) RESULTS


RESULTS

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A complete Price Forecasting and Probabilistic Forward Curve Approach…

Mitigate the risks stemming from:

o Natural gas prices

o Weather conditions

o Maintenance cycle of power plants

o Natural gas crisis during winter period

o Change in electricity demand

Help in determining the true hedging strategy.

o Bilateral Agreements (OTC) vs. Spot Market

Allows establishing the optimal portfolio which drives through profit maximization


CONTENT

CONTACTSüleyman Seba Caddesi, BJK Plaza A-Blok Kat 1

Beşiktaş/İstanbulTel: +90 212 276 55 22 Fax: +90 212 236 79 40

[email protected]

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