SPP CWG Integrated Marketplace Implementation Phase Kick-off - - PowerPoint PPT Presentation

SPP CWG Integrated Marketplace Implementation Phase Kick-off Meeting Brett Kruse Calpine Corporation June 22-23, 2011

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• Largest IPP in U.S

. by megawatt hours produced

• The fleet:
• 28,081 MW of capacity from 92 plants in

20 S tates and Canada

• Primarily natural gas-fired plants
• S

mallest greenhouse gas footprint among our peers

• Nation’ s largest:
• Operator of natural-gas fired and

combined-cycle plants

• Fleet of highly efficient CHP plants
• Baseload renewable generator with

15 geothermal plants at The Geysers in northern California

Calpine: At a Glance

Hay Road Energy Center (Wilmington, DE) Pastoria Energy Center (Lebec, CA)

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National Portfolio of More Than 28,000 MW

Geographic Diversity Dispatch Flexibility

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Most Recent ISO/RTO Market Launches and Major Design Changes

• PJM Nodal Market launch (1998)
• California IS

O Market launch (1998)

• NYIS

O Market launch (1999)

• Nepool Market launch via IS

O-NE (1999)

• ERCOT Zonal Market launch (2001)
• Nepool Nodal Market launch via IS

O-NE (2003)

• MIS

O Energy Markets launch (2005)

• MIS

O Ancillary S ervice Markets launch (2009)

• California IS

O Nodal Market launch (2009)

• ERCOT Nodal Market launch (2010)

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Lessons Learned from Our Experiences

• Put together a Proj ect Team that fits your company’ s business and is based
• n:
• Experience with other markets
• Commercial exposure to S

PP markets

• Degree of out-sourcing your company will utilize
• 1. Full out-source via services contract
• 2. Out-source some functions (shadow settlement, dispatch tool design,

etc.)

• 3. Build all tools in-house
• New opportunities with implementation of the new markets
• Get ready to experience a complete change in transaction thinking
• Financial transactions instead of physical transactions
• Asset optimization DA and RT
• Flexibility matters
• Must be able to react to RT
• Forecasting is MUCH more important!!!
• Your positions
• Everyone else’ s positions

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Lessons Learned from Our Experiences

• S

ettlements take on a whole new meaning

• Must be able to shadow-settle effectively
• Identify and resolve areas of dispute – OR OVERPAY
• S

PP will utilize 5-minute settlement (NYIS O!!!)

• Asset modeling needs to be exact and precise
• UNDERSTAND YOUR RISK!!!
• Will be different with each Market Participant
• May not be apparent
• Other Market Participants will capitalize on those that do not understand

their risk exposure (banks and speculative shops)

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Lessons Learned from Our Experiences

• LMP prices during testing should not be expected to reflect reality
• No incentive to offer real pricing
• some want to use proposed prices to see how system reacts (stress-

testing the system)

• S

elf-scheduling definitely will affect LMP prices

• S

PP already has a RT LMP-type system, so that may help provide more “ accurate” LMP prices during testing

• IMM interaction and relationship
• Role will change greatly
• Will evolve over time
• Must understand your assets and their physical abilities and limitations,

and accompanying financial costs

• S

taff must be drilled on proper communication – who is allowed to speak with IMM staff?

• Poor relationship can have devastating cost

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Lessons Learned from Our Experiences

• Outage coordination is usually a challenge
• What is the role of the TO?

GO? RTO?

• What ability does the RTO have to ask generators to move approved
• utages?
• What kind of look-ahead outage schedules are needed?
• Dispatching DA and RT can sometimes be problematic
• Modeling of unit start-up times and required down times
• Modeling of ramping limitations
• Transmission and validation of OOM deployments and other “ special

requests”

• S

ettlement of system uplift – did OOM dispatches get paid as required?

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Lessons Learned from Our Experiences

• You need to find all system integration issues during testing
• Vendors have plenty of experience, but interfaces can sometimes be

unique

• Integration of RTO systems to Market Participants’ systems
• Very important everything is testing prior to market launch
• Prepare for the market to launch on time, but don’ t be surprised and

depressed if launch is delayed more than once – history is very consistent for unique designs

• S

ince 2001, only one market has launched on time and under budget

• Market Participants need to be ready, and S

PP/ MPs need to be able to discern MPs important to success and those who are not

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Lessons Learned from Our Experiences

• Determine staffing needs for your company
• How much outsourcing?
• How many vendors?
• How much in-house development?
• Market interaction strategy?
• Advocacy/ Governance?
• Advocacy group participation?
• Don’ t expect other market participants to have the same priorities as your

company – in other words, don’ t let their actions or lack thereof frustrate you – note earlier caution regarding

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“ They always say time changes things, but you actually have to change them yourself.”

The Philosophy of Andy Warhol

Andy Warhol (1928 - 1987)