2019 ANNUAL REPORT HIGHLIGHTS WITH SELECT HIGHLIGHTS FROM WINTER - - PowerPoint PPT Presentation

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2019 ANNUAL REPORT HIGHLIGHTS WITH SELECT HIGHLIGHTS FROM WINTER - - PowerPoint PPT Presentation

Dec 28, 2022 356 likes •852 views

2019 ANNUAL REPORT HIGHLIGHTS WITH SELECT HIGHLIGHTS FROM WINTER 2020 QUARTERLY REPORT MAY 26, 2020 Helping our members work together to keep SPPorg southwest-power-pool SouthwestPowerPool 1 the lights on... today and in the future.

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SouthwestPowerPool SPPorg southwest-power-pool

Helping our members work together to keep the lights on... today and in the future.

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2019 ANNUAL REPORT HIGHLIGHTS

WITH SELECT HIGHLIGHTS FROM WINTER 2020 QUARTERLY REPORT

MAY 26, 2020

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ANNUAL REPORT OVERVIEW

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MARKETS COMPETITIVE OVERALL

  • Low energy prices
  • Low frequency of offer mitigation
  • All frequently constrained areas removed
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MARKET DRIVERS

  • Factors influencing prices higher:
  • Increased generation outages
  • Factors influencing prices lower:
  • Lower gas prices
  • Increase in low-cost generation resources
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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
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RECOMMENDATIONS – NEW

  • Improve price formation during
  • Emergency conditions
  • Scarcity events
  • Incentivize capacity performance
  • Update and improve outage coordination methodology
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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
  • utcomes
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MARKET DRIVERS

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SPP GENERATION CAPACITY MIX

Coal 26% Gas, simple cycle 26% Wind 25% Gas, combined cycle 15% Hydro 4% Nuclear 2% Oil 2% Solar 0% Other 0%

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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 GWh (thousands) 2017 '18 '19

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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 $/MMBtu $/MWh Day-ahead price Real-time price Panhandle Eastern Pipeline gas cost

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WIND CAPACITY ADDITIONS CONTINUE TO OUTPACE RETIREMENTS

600 1,200 1,800 2,400 2017 2018 2019 2017 2018 2019 Nameplate capacity (MW) Coal Wind Hydro Gas Oil retirements additions

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WIND CAPACITY AND GENERATION CONTINUED TO INCREASE

20,000 40,000 60,000 80,000 6 12 18 24 2014 2015 2016 2017 2018 2019 Generation (GWh) Capacity (GW) Dispatchable capacity Non-dispatchable capacity Wind generation

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GENERATION OUTAGES – SPECIFICALLY GAS, SIMPLE-CYCLE OUTAGES – INCREASED

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 Outage (GWh) Coal Gas, combined-cycle Gas, simple-cycle Hydro Nuclear Oil Other Renewable Wind

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SELF-COMMITTED START-UP INSTRUCTIONS DOWN

2017 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

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MARKET PERFORMANCE

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ALL-IN COSTS WERE DOWN 12 PERCENT AND WERE DRIVEN BY ENERGY COSTS

$0 $1 $2 $3 $4 $0 $10 $20 $30 $40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Natural gas cost ($/mmBtu) All-in price ($/MWh) Energy (LMP) Reserves Day-ahead MWP Real-time MWP Gas PEPL

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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 Percent negative price intervals LMP −$0.01 to −$25.00 LMP −$25.01 to −$50.00 LMP less than −$50.00

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MARKET REVENUE INSUFFICIENT TO SUPPORT NEW GENERATION

Technology Average marginal cost ($/MWh) Net revenue from SPP market ($/MW yr.) Annual revenue requireme nt ($/MW yr.) Able to recover new entry cost Annual fixed O&M cost ($/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

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WIND AND COAL GENERATION TRENDING IN OPPOSITE DIRECTIONS

0% 10% 20% 30% 40% 50% 60% 70% 2014 2015 2016 2017 2018 2019 Percent of total generation Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear

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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 Percent of total generation Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear

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VIRTUAL TRANSACTIONS CONTINUE TO GROW STEADILY

  • 8,000
  • 6,000
  • 4,000
  • 2,000

2,000 4,000 6,000 8,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Average hourly volume (MW) Cleared bids < $30/MWh Cleared offers < $30/MWh Cleared bids > $30/MWh Cleared offers > $30/MWh Uncleared bids Uncleared offers Net cleared

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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)
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PRICES DURING EEA 1 DID NOT REFLECT EMERGENCY CONDITIONS

$0 $300 $600 $900 $1,200 $1,500 8:00 9:00 10:00 11:00 12:00 13:00 14:00 14:30 15:00 15:30 16:00 17:00 18:00 19:00 20:00 Marginal energy component ($/MWh) Marginal energy component

EEA1 Conservative operations

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CONGESTION

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CONGESTION HAS SHIFTED TO THE SOUTHEAST

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FREQUENTLY CONSTRAINED AREAS CHANGING AS CONGESTION SHIFTS

Day-ahead marginal congestion component

Central Kansas 2018 study addition 2019 study removal Southwest Missouri 2018 study addition 2019 study removal

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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 Millions Millions Payments from MISO to SPP Payments from SPP to MISO Net payments

Total

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TRANSMISSION CONGESTION AND AUCTION REVENUE RIGHT FUNDING

0% 20% 40% 60% 80% 100%

  • $200

$0 $200 $400 $600 $800 2017 2018 2019 Funding percent Millions

TCR funding

Day-ahead revenue Transmission congestion right funding Surplus/shortfall Funding percent

0% 40% 80% 120% 160% 200% $0 $100 $200 $300 $400 $500 2017 2018 2019 Funding percent Millions

ARR funding

Transmission congestion right revenue Auction revenue right funding Surplus/shortfall Funding percent

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MARKET EFFICIENCY

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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 Millions

Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other

$0 $10 $20 $30 $40 2017 '18 '19 Millions Total

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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 Millions Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other $0 $15 $30 $45 $60 $75 2017 '18 '19 Millions Total

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SCARCITY EVENTS INCREASED IN 2019

$0 $250 $500 $750 $1,000 50 100 150 200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Marginal energy cost ($/MWh) Scarcity intervals Operating reserve scarcity Regulation-down scarcity Regulation-up scarcity Operating reserve scarcity price Regulation-down scarcity price Regulation-up scarcity price

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REAL-TIME PRICE VOLATILITY UP, BUT DAY-AHEAD VOLATILITY DOWN

20 40 60 80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Volatility (standard deviation) real-time volatility day-ahead volatility

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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 400 800 1,200 1,600 2,000 2,400 Additional energy Reductions MWh Net additional real-time supply

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UNDER-SCHEDULING OF WIND IN DAY-AHEAD MARKET CAN CONTRIBUTE TO DISTORTED PRICE SIGNALS

84% 88% 92% 96% 100% 2,000 4,000 6,000 8,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Day-ahead percent cleared GWh Day-ahead offered GWh Day-ahead cleared GWh Wind forecast Day-ahead percent cleared

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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 Percent of resource hours mitigated 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 Percent of resource hours mitigated Real-time

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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 Percent of start-up offers mitigated Day-ahead Reliability unit commitment Manual

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MARKET CONCENTRATION INCREASED INTO THE MODERATE ZONE WITH THE EVERGY MERGER

500 1,000 1,500 2,000 Herfindahl-Hirschman Index Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Unconcentrated Moderately concentrated Highly concentrated

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AVERAGE ANNUAL OFFER PRICE MARKUP NEGATIVE FOR ON-PEAK AND OFF-PEAK

  • $20
  • $16
  • $12
  • $8
  • $4

$0 $4 2017 2018 2019 2017 2018 2019 Off-peak On-peak Offer price marginal cost markup ($/MWh) High Average Low

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QUESTIONS?

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WINTER 2020 QUARTERLY STATE OF THE MARKET REPORT

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COAL GENERATION CONTINUES TO DROP, WHILE WIND & GAS GENERATION CLIMBS

0% 10% 20% 30% 40% 50% Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 2018 '19 '20 Nuclear Wind Coal Gas, combined cycle Gas, simple cycle Winter

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MARKET COMMITMENTS UP, WHILE SELF-COMMITMENTS DOWN

0% 20% 40% 60% 80% Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 2018 '19 '20 Market Self Outage Winter

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GENERATION OUTAGES ARE DOWN

10,000 20,000 30,000 40,000

Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 2018 '19 '20

GWh Coal Gas, CC Gas, SC Hydro Nuclear Oil Other Renewable Wind

Winter total

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ENERGY PRICES AND GAS COSTS CONTINUE TO DECLINE

$0 $1 $2 $3 $4 $0 $10 $20 $30 $40 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20 Feb 20 2018 '19 '20 Gas price ($/MMBtu) LMP ($/MWh) Day-ahead price Real-time price Gas cost

Winter

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HIGHEST PRICES AND CONGESTION IN SOUTHEAST CORNER OF FOOTPRINT

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QUESTIONS/COMMENTS

gwarren@spp.org 501-614-3235

  • r

SPPMarketMonitoring@spp.org