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June 5, 2020
About Ansergy
Ansergy Founded in 2015, PowerLytix* Founded in 2002
● Clients - 45 Trading/Hedging Firms
● Market Share - 48,000 MW of Generation; 44,000 MW of Load
● 50-60% of Traded Market uses Ansergy
Michael Thomas Griswold, Founder
● Executed 8514 Term Trades (1997-2011)
● $884 Million MTM Value
● Wholesale WECC since 1991
○ Pricing Manager at Large NW Ute
○ Term Speculative Trader
○ Serial Entrepreneur
○ Energy Analyst
* PowerLytix was sold to Barclays Capital in 2008 and was the precursor to Ansergy
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June 5, 2020
How Does Your Firm Hedge?
1. No Hedge
a. Everything is covered in the Day Ahead
2. Power Purchase Agreements (PPA)
a. Types
i. Renewables
ii. Customized PPA
b. Balance covered in Cash
3. Term Markets
a. Combo Term and Cash
4. All of the Above
What’s Best?
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June 5, 2020
Observations
● Solar Hours are the cheapest
○ HE8-19
● Overall, DA > HA
○ $24.45 vs $23.79
● HA is more Volatile
○ 145 vs 131
● HE22-23 Most Volatile
Seasonality?
Cash Markets
Day Ahead (DA) vs Hour Ahead (HA)
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June 5, 2020
LMP - Seasonality
% of Time Day-Ahead LMP cleared higher than Hour-Ahead LMP
● May, June, and August
○ cleared higher in Hour Ahead markets
● October through January
○ Day Ahead consistently higher
● All three Hubs are similar
Seasonality is at Play
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June 5, 2020
Cash - Conclusions
● The MOST RISKY Hedging strategy
● Unavoidable
○ some load must be covered in the Cash Markets
● Arbitraging DA vs HA
○ Quant-based system better than a flip of the coin
Cash Markets are not Hedging, just Liquidation
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June 5, 2020
Strategies - Near Term
“Buying power in the open market”
Does it make sense?
● Absolutely
○ If you know what you are doing
● Term Market Attributes
○ Volatile
○ Illiquid at times
○ Tracks cash
○ Prices moves CAN be predicted
■ Basis of every successful term trader/hedger
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June 5, 2020
Maximum Savings
Term Hedging vs Cash
● Forward Market 2018-2020
● Maximum Term Market Hedge Value
Timing is Everything
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June 5, 2020
Ansergy = Optimized Term Hedging
● ESP - Execution Support Products
○ TradeRankTM
■ Fundamental & Technical analysis of 800 WECC Derivatives
○ MRITM - Market Richness Index
■ Measure the relative “Richness” of a derivative
● Across Time
● Across Derivatives
○ Market Commentary
■ Term Market Commentary
■ Daily Updates
■ Months and Quarters
● Includes “Hedge” “Don’t Hedge” calls
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June 5, 2020
TradeRank TM
a ● TradeRank ™
○ 800 Derivatives modeled daily
● MRI ™
○ Market Richness Index
○ Relative Buy/Sell Signals
● Forecast vs Market
● Market vs Historical Spot Settles
Ansergy’s Most Popular
Report
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June 5, 2020
TradeRank™ Components
MRI Components (3)
● Market vs Market
● Market vs Forecast
● Market vs Historical Settles
Quant-based System for Timing
Term Market Hedges
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June 5, 2020
Example - Feb 2019
● Six Week Hedge Window (Dec 14 to Jan 22)
● Strong MRI Buy Signals
● $48.97 MWh Savings to your Customers
○ $3.8 Million Savings (200 MW HL hedge)
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June 5, 2020
Example - July 2018
● Strong MRI Buy Signals, starting 30 days before delivery
● $76.11 MWh Savings to your Customers
○ $6.1 Million Savings (200 MW HL hedge)
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June 5, 2020
Power Purchase Agreements (PPA)
● Prices for PPA from LevelTen
● P25 = 25% best PPA prices
● PPA Premium = PPA Price - Forecast
● Forecast
○ Hourly for 48 Locations
○ Updated Daily
○ 96 Forecast items, including Power
Price
Are Solar PPAs the Right Hedge?
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June 5, 2020
Hedging the Wrong Hours
● Most volatile hours have little or
no solar gen
● Least volatile hours have max
solar gen
● Greatest price risk is hours 17-
21 and 6-8
Solar PPAs Are a Weak Hedge
1. Hedge the Least Volatile Hours
2. Hedge the Least Expensive Hours
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June 5, 2020
Percent of Risk-Adjusted Hedged Load
Customer’s Risk
% Hedged with a Solar PPA
● Risk-Adjusted Load
○ Hourly volatility * Hourly Price * MWH
Dual Purpose of a Hedge
● Minimize Costs
○ Solar Hedge > Market Price
● Maximize Reliability
○ Solar MWH = non-firm energy
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June 5, 2020
Volatile Cost to Serve Load
(millions $)
● Assumptions
○ 500 MW Peak Socal Load
○ 200 MW Solar PPA @ $24/mwh
○ Balance covered in Cash
○ 10 Years (2020-2029)
○ Term Markets @ Today’s Price
● Cost Range
○ Low = $812 Million
○ High = $1,197 Million
○ $385 Million swing for your customers
Takeaway
Cash is volatile and Term Market prices are competitive to cash
Sometimes!
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June 5, 2020
Conclusions
● Day Ahead vs Hour Ahead - Roulette Wheel
○ Gambling with your Customers wallet
○ Necessary Evil
● Socal Solar PPAs - A Weak Hedge
○ Over-priced
○ Wrong Hours
● Market Hedge - Good, Bad, and Possibly Ugly
○ Art of the Hedge
■ With appropriate tools/data can Benefit your Clients
■ With no tools, no experience
● Don’t Bother
● Dream Hedge
○ RFP for Non-Solar Hours, 10 Year Contract
■ Price? Unknown until you issue your RFP
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June 5, 2020
Free 7-Day Trial?
● Free to any Load-Serving SDED Participant
● 24/7 Access
● Data, Forecasts, ESP, MRI
● Customized dashboards
● Downloads activated
Data From This Presentation?
● Free for any Load-Serving SDED Participant
● Includes all assumptions, data, and additional observations
● Consultations are available upon requests
Contact Ansergy
● 206-877-0991
● info@ansergy
● Or visit our Private SDED Symposium Room
