manitoba hydro’s export markets · 2012. 9. 22. · 2 topics |what is surplus |export background...

Manitoba Hydro’s Export Markets

A. David Cormie P. Eng.Division Manager Power Sales and OperationsManitoba HydroMay 2010

2

Topics

What is SurplusExport BackgroundThe Border and Loop FlowsCurtailment Rights, Events and PriorityMarketsMerchant TransactionsPrices, Pricing and Price Example and Volumes RelationshipsTransmission, Transfer Capability, TX RightsManitoba Hydro’s Future in the Market

3

Planning in Uncertainty

Accurate long term forecasts arenot availableHistory is only an indicator

Statistics help

Reliability of SupplySocietal costs of power shortagesare enormousMH does not rely on its predictiveabilityDecisions made on the worst case

• 95%-99% CIExport curtailment rights

EconomicsDecisions made on expectedoutcomeUnderstand the risks

0

5

10

15

20

25

30

35

40

45

0 1 2 3 4 5 6 7 8 9

June HEI (TWh)

July

1to

Mar

ch31

HEI(

TWh)

HODNovember 10, 2009

90 % CI50 %95 %

50 %

5 %

Water Supply

4

What is Available to Export?

Surpluses not needed byManitobans

Firm load• Energy• Capacity

ReservesAll transactions asset backed

MBLoad(MW)

% of Time

Outages and Reserves

Surplus Capacity

5

50 Years of Exports

0

2

4

6

8

10

12

14

16

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

MW

h x

(mill

ions

)

Sales = $8.5 billion

GrandRapids

Kettle

Long SpruceJenpeg

Limestone

6

Changing Nature ofExport Market

BilateralMISOAESOIESO

$0

$100

$200

$300

$400

$500

$600

$700

$800

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Sal

es ($

M)

Bilateral AESO IESO MISO

Open TXAccess

50+

DirectInterconnects

7

Emergence of Markets?

7

Export Customers - 2009/10(millions)

Customer A $164 40%MISO $102 25%IESO $ 49 12%Customer B $ 23 6%Customer C $ 18 4%Customer D $ 15 4%Customer E $ 8 2%Customer F $ 6 1%Others $ 17 4%

Markets = 40% But Who?

8

MH Export Functions

1998 Functional Separation

Transmission System Operations DivisionReliability - “Keep the lights on”Operate MH transmission systemDispatch MH generation fleetProvide wholesale non-discriminatory transmission service

Power Sales and Operations DivisionMH merchant functionMaximize the value of MH surplus assets in the export markets

9

National Energy Board

Regulates MH’s export activities to USAll US exports are licensed

General export permits• Firm and non-firm• Duration less than 5 years

Specific sale permitsTransmission line licences

MH reports monthlyEnergy physically delivered

• Does not include the portion ofsales served from the market

Revenues

10

The Borders

Title transfers at the borderCanada - US

• Sale of electricity in Canada• Not subject to US/state tax law• Not subject to US jurisdiction• MH does not have Market Based Rate Authority

• Can’t sell at market based rates in USOntarioSaskatchewan

Meters are deemed to beat the border

Compensated

11

Electricity FlowsPhysical flows

MH is electrically connected to the entire Eastern InterconnectionElectricity flows over a transmission networkIt follows path of least resistanceVary second by secondMH responsible to control flows in/out MBMeteredIncludes inadvertent loop flows

Scheduled flowsIncludes exports and imports on interface

• Not just MH transactionsVary hourlyAssumed to follow contract pathNERC tagged for reliabilityCut when necessary by NERC priority

Financial transactionsNo effect on power flows

500 kV line

MH-US InterfaceMHEX_S

Net flow on1 x 500 kV3 x 230 kV

12

MH Curtailment Rights

Corollary: Dependable sale contracts improve the reliability of supply

Generation reserved for export sale is ultimately available to serve MBTX lines built for export provide import capabilityImport lines help in emergencies

All export sales include the right to physically curtail delivery in order to give Manitoba firm load priorityDefined in contract

13

Curtailment EventsGeneration

Forced outagesScheduled outagesDeratesLoss of HVDC capacityUnavailability of purchased powerEvents of Force Majeure

TransmissionLoss of Transmission Service

14

GenerationCurtailment Priority

4. MH’s firm load3. Energy sales backed by planning

capacity2. Firm energy sales1. Other energy sales

On a prorata basis within a priority groupVintage contracts may vary

15

TransmissionCurtailment Priority

NERC transmission service priorityFirm 7Non firm 6 – network

5 – monthly4 – weekly3 – daily2 – hourly1 – secondary

On a prorata basis within a priority groupVintage contracts may vary

16

Generation Curtailments

MH can only curtail to the extent necessary to serve higher priority sale

Economics is not a reason for curtailmentWould destroy the value of fixed price contract

MH may choose to continue to serveEconomics• Sale = $60/MWh Replacement Cost = $45/MWhReputation

17

Curtailment LD RiskLiquidated Damages• Cost of replacement power• Seller pays LD to buyer

Generation curtailments• MH Dependable sales do not include

LD provisions• Market Sales include LD

• Most sales are Day Ahead• DA trades above Real Time on average

Transmission curtailments• LD risk depends on market rules

18

System SalesSales from MH resources

Asset backedSurplus to the needs of ManitobansExpectation of net benefitDependable sales

StrategicLong termFrom dependable energy and accredited capacity resourcesFixed or market priced

Opportunity salesAll other (long term, term, firm,non-firm, merchant, ancillary services, environmental attributes, etc.)

19

ExportsDependable, Term and Spot

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10Fiscal Year

Sale

s in

GW

h

Dependable Opportunity - Term Opportunity Spot

16%44% 44%

20

2009/10 SalesMillions GWh

Dependable $186 (46%) 3,263Merchant $ 26 (6%) 775Opportunity

Bilateral• Term $ 59 (15%) 2,594• Day Ahead $ 0.5 (0%) 25• Real Time $ 0.5 (0%) 10

Market $130 (32%) 4,969Total $402 11,636

21

Electricity Markets

Centrally dispatched electricity markets

many generators in competition

MH generation andload are outsidethe marketsMH is a market participant MISO

IESO

AESO

22

MISOMid-West Independent System Operator

159,000 MW generationLocational Marginal Price LMP

2072 pricing nodesDay Ahead Financial Market

Energy and Ancillary ServicesMH can set priceHourly pricingHedging productsClears and Settles DA

Real Time Physical Market5 min pricing…paid hourlyMH is price taker on energyDeviation from DA subject to penalties

MH offer in up to 1950 MW

23

IESOOntario Independent Electricity System Operator

38,000 MW20 power producers

Real Time MarketMH can set price5 min pricing...paid hourlyHedging products

CMSC PaymentsCongestion managed atthe border firstIESO pays make whole payments$20 million in 2009/10

MH can offer in 263 MW

24

AESOAlberta Electricity System Operator

11,000 MWReal Time Market

5 minute pricing…paid hourlyMH is price taker

Transmission into Alberta from Saskatchewan islimited to 150 MWTransmission acrossSaskatchewan is limited

DCTie

25

Sales/Purchase Types

DependablePhysicalFinancial

OpportunitySystem

• Bilateral or Term• Physical• Financial

• Market• Day Ahead• Real Time

Merchant

26

Merchant Transactions

ArbitrageOff systemBuy for immediate resaleIn markets where MHalready has a presenceProfits (>2005) $12.0 million

• Revenues $44.4 million• Expenses $32.4 million

Non-ArbitrageNot permittedSpeculative

INOH

SD

MN

WI

IA

IL

MO

MI

ONTMB

BuyLow

SellHigh

$

$$

Wheel Through MISOto Ontario

27

Merchant TransactionsSince April 1, 2005

Related Merchant Monthly Trading Profits

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

Apr-05

Jun-0

5Aug

-05Oct-

05Dec

-05Feb

-06Apr-

06Ju

n-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-0

7Aug

-07Oct-

07Dec

-07Feb

-08Apr-

08Ju

n-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-0

9Aug

-09Oct-

09

Date

Prof

it

28 0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

MW

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Manitoba Load

Exports

Hydro Can Concentrate Generation into Highest Value Hours

Average

Limited by storage and transmission

29 0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

MW

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Manitoba Load

Exports

Under High FlowsHydro Cycling Is Limited

Average

Tielines Maxed OutIn All Hours

30

Pricing

FixedLong term contracts are indexed to inflation

MarketDay Ahead and Real Time

Market Traded Term Products5 x 167 x 8WrapTraded at electricity hubs

• Minn Hub, Cinergy• Liquid

31

Prices

Locational Marginal Prices reflect the marginal cost of supplying the next MW of load

5 minute prices are aggregated into an hourly priceHourly prices follow load pattern

Low loads = low prices• Low cost generation is run first

High loads = high prices• High cost generation is run last

On Peak / Off PeakAveraging periodsMH average prices aren’t necessarily average market prices

• Volume weighted

32

Normalized MISO Market PricesMonday – Friday Winter

$50 5x16

$18 for H.E. 4(@36%)

33

Normalized MISO Market PricesMonday – Friday Winter

On peak hours- No single price- Some prices lower than off peak

34

Normalized MISO Market PricesMonday – Friday Summer

BuyingBuy HE 3

first

SellingSell HE 14

first

35

Opportunity SalesPricing Example

24 Hours

Manitoba Load

Dependable Sales

16 hours

MW

Accredited CapacityAvailable CapacityTieline Limit

5000Operating Reserves, Outages

Maximum Export Load

Capacity available for5x16 Term Sale

36

Add 100 MW Bilateral Term Sale1600 MW @ $150/MWh

24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term

Block MWh $/MWh AvgTerm 1600 150 150

1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

37

Next Add 600 MWh On PeakDay Ahead Sales @ $105/MWh

24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

38


24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

39


24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

40

Next Add 1000 MWh Off PeakDay Ahead Sales @ $50/MWh

24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

41


24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

42


24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

43

Lastly Add 1000 MWh Off PeakDay Ahead Sales @ $18/MWh

24 Hours

Manitoba Load

Dependable Sales

16 hours

MW


5000

Term


1 600 105 1382 240 95 1343 230 55 1274 1000 50 1065 1000 24 886 1000 19 767 1000 18 67

Extra Energy Gets Spilled

44

Illustrative MISO SellingPrice-Volume Relationship

April - November

On peak

$-

$25.00

$50.00

$75.00

$100.00

$125.00

$150.00

$175.00

0 200 400 600 800 1000 1200 1400

Volume (MWh x 1000)

Pric

e ($

/MW

h)

Off peakOn peak

Term

45

$-

$20.00

$40.00

$60.00

$80.00

$100.00

0 200 400 600 800 1000 1200 1400

Volume (MWh x 1000)

Pric

e ($

/MW

h)

Illustrative MISO BuyingPrice-Volume Relationship

April - November

On peakOff peak

This PV relationship is because of MH load shapeNot because MH market activity affects market price

46

Transmission Service

Each RTO has Transmission TariffNetwork Service

• Serve network loadPoint to Point Service

• Merchant transactions (across SK)

MH-MISO Coordination AgreementTariffs

• MISO waives PTP when sinking in MB• MH waives PTP when sinking in MISO

Coordinated TX operations• Outage scheduling• Transfer limits

Dorsey

Mpls

MISONetworkService

($ Prepaid)

MHEBPTP

Service($ waived)

100 MWh

47

Total Transfer Capability

• Ratings

• Export/Import

• On Both Sides

•May be different

• Varies Seasonally

• System Intact

500 MW500 MW

2250 MW2250 MW

48

TransmissionPhysical

Total Transfer Capability (TTC)Maximum Rated Capacity

TX Reliability Margins (TRM)Set aside to manageunscheduled flows

Capacity Benefit Margin (CBM)Set aside to enabledelivery of reserves

Scheduling limits (ATC)ATC = TTC – TRM - CBMFirm (7)

• If unused goes to non-firm• Like keys to the car

Non-firm (1-6)

TTC

FIRM

CBM

TRM

Non FIRM

ATCAvailable

ForCommercialTransactions

49

Who Controls Transmission?(Who owns the keys?)

In ManitobaMH controls 100%

No load at border

In USMH controls 27%MH’s customers control 73%Others

73%

MH100%

MH27%

SummerSeason

50

US FirmTransmission Reservations

MHEX South Summer

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Meg

awat

ts

471 PTP

MP 50

MMPA 30

NSP 213

OTP 55

OTP 50

GRE 50

WPS 100

NSP 500

Diversities

Summer ATC (1743)

HoldersNSPMHGREWPSOTPMMPAMP

Roll Over RightsRight to Redirect

ATC

51

Market Access is…

Free trade (open borders)No legal impediments

Being physically connectedHaving partners willing to invest in TXHaving a say in establishing the rules/limits

Having the right to the transmissionOwning the keysCoordinated TX Tariffs

Non-discriminatory treatmentMarket rulesEconomic development policies

52

Manitoba Hydro is Small

Relative to other utilities/suppliersBy itself MH lacks significant influence

Outside of markets• Market rules are designed for those inside

Outside of Manitoba/Canada• Public policy is designed for local jurisdictions

Strategic relationships are importantGovernment to governmentIndustry organizationsCustomers

53

Manitoba Hydro is a Preferred Partner

Highly respected and trustedShared values

History of mutually beneficial relationshipsSells products that provide value

DiversityStorageFlexibleRenewable

54

Transmission Is Key

Manitoba is remoteLong transmission lines are required to reach large load centers

Most of that transmission is outsideof ManitobaNew transmission is

Expensive and not built on specUnpopularVery difficult to permit

Transmission pays benefitsin perpetuity

55

Wind is the Jet Streamon which new major transmission will bejustified and built

Renewable Portfolio Standards25 by 25 in MN

Wind is seen as a major part of the solution in the US to climate change

60,000 MW in the MISO transmission queueMinnesota, Iowa, North Dakota

In addition to being renewable hydro provides regional benefits

Manitoba Battery

56

State renewable portfolio standard

State renewable portfolio goal

www.dsireusa.org / September 2009

*† Extra credit for solar or customer-sited renewables

Includes separate tier of non-renewable alternative resources

☼ Minimum solar or customer-sited requirement

29 states & DChave an RPS

5 states have goals

WA: 15% by 2020*

CA: 20% by 2010

☼ NV: 25% by 2025*

☼ AZ: 15% by 2025

☼ NM: 20% by 2020(IOUs)

10% by 2020 (co-ops)

HI: 40% by 2030

TX: 5,880 MW by 2015

UT: 20% by 2025*

☼ CO: 20% by 2020(IOUs)

10% by 2020 (co-ops & large munis)*

MT: 15% by 2015

ND: 10% by 2015

SD: 10% by 2015

IA: 105 MW

MN: 25% by 2025(Xcel: 30% by 2020)

☼ MO: 15% by 2021

WI: Varies by utility; 10% by 2015 goal

MI: 10% + 1,100 MW by 2015*

☼ OH: 25% by 2025†

ME: 30% by 2000New RE: 10% by 2017

☼ NH: 23.8% by 2025

☼ MA: 15% by 2020

+ 1% annual increase(Class I Renewables)

RI: 16% by 2020CT: 23% by 2020

☼ NY: 24% by 2013

☼ NJ: 22.5% by 2021

☼ PA: 18% by 2020†

☼ MD: 20% by 2022

☼ DE: 20% by 2019*

☼ DC: 20% by 2020

VA: 15% by 2025*

☼ NC: 12.5% by 2021(IOUs)

10% by 2018 (co-ops & munis)

VT: (1) RE meets any increase in retail sales by

2012;(2) 20% RE & CHP by 2017

KS: 20% by 2020

☼ OR: 25% by 2025 (large utilities)*

5% - 10% by 2025 (smaller utilities)

☼ IL: 25% by 2025

Renewable Portfolio Standards

57

U.S. Transmission Policy

Who builds, owns, pays for itCongress and the Federal Energy Regulatory Commission are struggling over cost allocation, siting and planning issuesLack of clarity over the above issues makes connecting remote resources difficult

Solutions will be developed soonWill large hydro count?

58

ManitobaPart of the Solution

Opportunity for Manitoba to leverage its hydro advantage into a new 1100 MWMB-US interconnection

750 MW of long term sales to MP and WPS1800 MW of new major hydro

Secure access for MH surplus in perpetuity to a large valuable marketUS will meet its renewable goals with or without Manitoba Hydro

80% reduction by 2050

59

The End

ThankYou !

manitoba hydro’s export markets · 2012. 9. 22. · 2 topics |what is surplus |export background...

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