I gave this presentation at the 2010 EPIS Electric Market Forecasting Conference. The attendees of this conference were all users of the AURORAxmp electric market simulation application so the implementation of the concepts are specific to AURORAxmp but the concepts themselves are generally applicable
EPA's Clean Power Plan: Basics and Implications of the Proposed CO2 Emissions...
Long Term Resource Planning in an Uncertain World
1. Long Term Resource Planning in the Face of an Uncertain Carbon Future Art Freitas La Capra Associates Inc. Presented By:Art FreitasLa Capra Associates 2010 Electric Market Forecasting Conference Presented To: September 17, 2010
22. Findings Assumptions of carbon allowance prices have a significant impact on resulting market prices for New England In the presence of low gas prices, carbon prices do not need to be very high before coal units are above the margin 9
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24. Client not only concerned with expected value but also the variance of the contract
25. Used the risk analysis functionality of Aurora to help analyze the problem10
71. Wholesale Market AnalysisProvides energy planning, market analysis, and regulatory policy services in electric and natural gas industries. PRACTICEAREAS:
Editor's Notes
New England went through a massive generation build at the end of the 90’s into early 2000’s10,000 MW highly efficient gas combined cycle plants builtOne third of NE generating stock turned overMiddle of the supply curve all looks the sameThroughout the decade with high gas prices coal was always below the marginThis has started to change in the last few yearsCoal is beginning to be the marginal resource in some hoursPartly due to lower loadsBig factor is low gas pricesThis is a theme that will feature prominently in our planning work
CT legislation requires CT utilities to file 10 year integrated resource plans regularlyCEAB decided that a 20 year IRP was needed as there were a number of issues that would need to be addressed more than 10 years out. Those issues, many of them environmental, had long lead times and so needed to be looked at now.LCA tasked with two main responsibilitiesreview the utility IRPdevelop an IRP with a 20 year planning horizon
Had an assumed shape, mean, standard deviation, and correlation with other driversInputs developed based on available information on outlook for carbon pricesAt this point information is pretty sparseEIA analysis of the Waxman-Markey billAny other information available on the potential price of carbonGave GMP negotiators an understanding of the behavior of the contract under current pricing termsHelped them negotiate terms that better reflected their risk tolerances and portfolio objectives while still being acceptable to the counterparty
More legislation to regulate carbon emissions being debatedPrimarily the American Power Act (Sen. Kerry and Sen. Lieberman Sponsors)EIA evaluation of this legislation not yet completePolitical landscape continuing to shiftDue to a number of reasons support for carbon legislation appeared to be erodingAs a result there is more uncertainty surrounding the future of carbonPrice levelTimeframe for implementationPossibility of no carbon legislation at allRepresentation of Carbon price in Phase I no longer seemed appropriate for environment
Discrete distribution seemed to better fit problem at handDiscrete distribution not one of the default distribution typesWorking closely with Customer Support a discrete distribution was implemented through the use of a computational dataset5 potential choicesEach choice has a different probability of occurrenceCorrelations between driver variables still maintained in this solution.Discrete distribution randomly picks a 20 year carbon price to include in the dispatch for each draw.5 choices are user specifiedEach choice represents a different outlook for implementation date and price level
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