Power Basics - FINC 782 Energy Markets Portfolio Analysis...

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1 FINC 782: Energy Markets Portfolio Analysis AB Freeman School of Business, Tulane University, New Orleans, Fall 2007 Leslie McNew Email at [email protected] 865-5036 Power Basics
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2 Physical Power Background Forecast Pricing Transmission
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3 Summary of U.S. Electric Power Statistics, 2000 and 1999 Item 2000 1999 a Capability (megawatts) 811,625 787,902 Utility 602,377 639,324 Nonutility 209,248 148,578 Net Generation c (billion kilowatthours) 3,800 3,705 Utility 3,015 3,174 Nonutility 785 531 25.6% Nonutility; 74.4% Utility Background
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4 Background
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5 Background Terminology Generation: production of electricity Capacity: measure of output performance/capability Watt: 1 unit of power. Frequently measured in megawatts (MWs) = 1 million watts MWh: Megawatt hour. 1 MW continuously delivered over one hour Load: power delivered by a generator (power consumed by an end-user: “native load”) Load Shape: consumption profile Load Factor: ratio of average load to peak load Commitment: determination of next available lowest cost generation capacity Dispatch: utilization of generation capacity
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6 Background Term Electricity is Traded over many timeframes hour next day balance of week weekly block balance of month monthly block (including futures) seasonal block (like summer or winter) long term fixed and/or floating transactions
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7 “FIRM” Specific Amount of Capacity Delivered Energy + Payment: “demand charge” Paid whether energy is taken or NOT Price for firm spot purchase and forward block purchases combine capacity and energy charges into a single price. Background Quality: Firm
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8 “NON-FIRM” also known as AKA Energy, Economy or Interruptible Specific Amount of Capacity Delivered Energy + Payment: rarely a “demand charge” If energy is not taken, do not have to pay Generating Utility can choose not to deliver practice: only interrupted for severe system reliability reasons Discounted to firm power: cheaper Background Quality: Non-Firm
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9 “PEAK” 6:00 AM 8:00 AM 10:00 AM 12:00 PM 2:00 PM 4:00 PM 6:00 PM 8:00 PM 10:00 PM Peak Block with Peak Periods Highest demand hours of the day East Coast : 5 x 16 West Coast: 6 x 16 6 AM to 10 PM 16 hours Days of weeks hours of 24 total Background Quality: Peak
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10 “OFF-PEAK” Lowest demand hours of the day East Coast : 5 x 8 + 2 x 24 West Coast: 6 x 8 + 1 x 24 10 PM to 6 AM 8 hours Days of weeks hours of 24 total 10:00 PM 11:00 PM 12:00 AM 1:00 AM 2:00 AM 3:00 AM 4:00 AM 5:00 AM Off-Peak Block Background Quality: Off-Peak Weekends plus nights
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11 Load ƒ(Temperature) Background Energy Correlated with Temperature
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Peak System MW - NEPOOL 12,000 13,000 14,000 15,000 16,000 17,000 18,000 19,000 20,000 21,000 1 3 5 7 9 11 13 15 17 19 21 23 Hours of the Day MW Feb 22 2001 Aug 22 2001 Background Energy Correlated with Temperature-Intra-day
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