1. business and industrial
2. energy
3. electricity

Ohio Energy
Workshop L
PJM Capacity …
Unpacking the Issues and
Developing Cost Management
Strategies
Tuesday, February 18, 2014
1:45 p.m. to 3 p.m.
Biographical Information
Ritesh Tipnis
Manager, Products
AEP Energy
225 West Wacker, Suite 700, Chicago IL 60606
312-488-5020
Fax: 312-488-5021
[email protected]
Dr. Ritesh Tipnis is the Product Manager in AEP Energy’s Product’s Team, and is
responsible for developing, launching and supporting the Company’s products and
services, including PJM and other RTO related programs. Prior to joining AEP Energy
in 2011, Ritesh was a Program Manager at a Printed Electronics company, Plextronics
Inc. in Pittsburgh, where he led the organizations Product Engineering team focused on
developing Photovoltaic Product offering.
A graduate of University Of Connecticut’s Ph.D. program in Polymer Science, Dr. Tipnis
has numerous publications and presentations at symposiums and conferences
organized by agencies such as Department of Energy and Department of Defense.
PJM Capacity…Unpacking the Issues and
Developing Cost Management Strategies
February 18th, 2014
2/4/2014
AEP Energy is a competitive retail electric service provider affiliated with American Electric Power, Inc.
AEP Energy is not soliciting on behalf of and is not an agent for any AEP utility.
CONFIDENTIAL
Copyright © AEP Energy, Inc. All Rights Reserved.
American Electric Power, Inc.
• AEP Energy is a wholly owned subsidiary of
American Electric Power Co., Inc. (AEP)
• AEP is one of the largest electric utilities in the U.S.,
delivering electricity to more than 5 million customers in
11 states
• A Fortune 200 company headquartered in Columbus,
Ohio, founded in 1906, with ~23 billion market cap
• The largest electricity transmission system in the U.S. &
one of the nation’s largest generators of electricity
AEP Energy
A competitive supplier of power and energy management since 2002, we
serve more than 200,000 customers and operate across the US.
2/4/2014
Copyright © AEP Energy, Inc. All Rights Reserved.
It’s More than Just Price
USAGE
PRICE
Demand
Energy
Gas
Capacity
Transmission
Supply
Distribution
Gas
Permanently
Reduced
Operating Costs
Improves
Your Bottom Line
• Energy Conservation can be considered a resource with
financial value
• Improved efficiency addresses all of the cost components that
go into an energy bill through:
o Reduced demand (kW)
o Reduced usage (kWh)
2/4/2014
Copyright © AEP Energy, Inc. All Rights Reserved.
Power Cost Breakdown
• Typical Electricity Bill Cost Components
• Smart procurement can only
address ~54% of total cost.
• Energy Management
addresses all energy bill
determinants:
o Permanent load destruction
(kW):
 Transmission (NSPL)
 Capacity (PLC)
 Distribution (peak billing
demand)
• Sample customer in Columbus Southern
service territory, GS3 rate, deregulated
supply, load factor of 70%.
• Based on 2014/15 rates
2/4/2014
o Reduced energy usage
(kWh):
 Energy & Ancillaries
o Reduced Natural Gas usage:
 MMBTU
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Capacity Cost Management - PJM
• Capacity costs are based on Capacity Prices and the
Capacity Peak Load Contribution (PLC) assigned to
each customer
o PLCs are determined based on average customer usage
over PJM’s five Coincident (meaning system wide, all load
coming on coincidentally together) Peaks (5CPs)
Day
Thursday
Friday
Wednesday
Tuesday
Monday
2/4/2014
Date
7/18/2013
7/19/2013
7/17/2013
7/16/2013
7/15/2013
Hour (EPT)
17:00
15:00
17:00
17:00
18:00
MW
158,953
156,085
154,070
151,439
150,726
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5
PJM Capacity Trends
•
•
The capacity rates in AEP show a modest increase from 2014/15 to 2015/16,
but in ATSI there is an increase by almost 130%
The rates decrease significantly in 2016/17
2/4/2014
Copyright © AEP Energy, Inc. All Rights Reserved.
Capacity Cost Management
• Peak Load (PLC) Management
o Reduce Capacity costs by reducing PLCs
 Capacity Cost reductions start in following delivery year
o Reduce PLCs by reducing load during Coincident Peak
• Emergency Capacity Demand Response (DR)
o Receive payments to curtail load when called upon
 Payments start in fall of the current delivery year, after summer
curtailment period
o Payments to Curtailment Services Provider (CSP) from PJM.
Typically passed through to Customer under DR contract.
o Offset but not equal to capacity costs
2/4/2014
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7
Emergency Demand Response
•
•
•
The market clearing price (MCP) is set through a Base Residual Auction
(BRA) process, three years in advance of the delivery year (DY)
There are subsequent 3 ‘sell’ and ‘buy’ incremental auctions
Starting DY 2014/15 there are 3 main DR products
o Limited – June-Sept (any weekday other than NERC holidays), up to 10
interruptions of for up to 6 hours
o Extended Summer – June-Oct and following May, unlimited interruptions for
up to 10 hours
o Annual DR – Any day (unless on an approved maintenance outage during
Oct-Apr), unlimited interruptions for up to 10 hours
2/4/2014
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8
PJM DR BRA Clearing Price (Limited Product)
AEP: Ext. & Ann.: $136
ATSI: Ext.: $322.08
ATSI Ann.: $357
Extended & Annual:
$125.99
2/4/2014
AEP: Ext. & Ann.: $59.37
ATSI: Ext. & Ann.: $114.23
Copyright © AEP Energy, Inc. All Rights Reserved.
Demand Response in BRA
2/4/2014
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Emergency Events in 2013
Monday
Tuesday
Thursday
7/15/2013
7/16/2013
7/18/2013
Tuesday
9/10/2013
Wednesday
9/11/2013
2/4/2014
Notification
13:50
11:30
12:40
13:00
13:50
14:45
11:30
12:00
Start
Release
15:50
13:30
14:40
15:00
15:50
16:45
13:30
14:00
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18:22
16:30
18:00
18:00
21:30
21:30
19:30
20:00
AEP (Partial)
Date
AEP
Day
ATSI
Time (EPT)
Capacity Cost Management Options
DR
Curtailment Quantity
DR Auction Clearing Price
DR Revenue
PLC Management
PLC Mitigation
2/4/2014
PJM Capacity Price
Cost Reduction
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12
Capacity Cost Mitigation – PLC
PLC Mitigation
PLC Reduction
• Equal to :
• Avoided PLC –
Actual PLC
• Avoided PLC is load during 5 CPs without any action taken
•
•
•
•
Zonal Scaling Factor (ZSF)
• Set by PJM to account for load growth
Forecast Pool Requirement
• Set by PJM to Account for Reserve requirements
PLC Mitigation
• Applied against RPM Auction Clearing Price to determine revenue
Customer reduces load when a Coincident Peak event is forecast
Total impact will be average of load reduction for each of 5 CP events
PLC Reduction will take effect the following Delivery Year
No penalty for non-performance
2/4/2014
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13
Capacity Cost Management – DR
Curtailment Quantity
•
•
•
•
•
Load Curtailed
DR Factor
• Equal to :
• PLC ‐ Firm Service Level (FSL)
• FSL is the maximum load customer will draw during test or curtailment event
• Set by PJM to determine the reliability benefit of demand resource and to assign an appropriate value to demand resource products
Forecast Pool Requirement
• Set by PJM to Account for Reserve requirements
Curtailment Quantity
• Applied against DR Auction Clearing Price to determine revenue
Customer nominates FSL when enrolling into DR program
Customer is required to drop load to FSL whenever PJM calls a DR Event:
PJM may call up to 6 Emergency Events, each up to 10 hours in duration each
year from June through September (Limited Product)
If no Emergency event is called, then PJM will call a Test Event
Non-performance penalties of up to 20% of expected payment
2/4/2014
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14
Capacity Cost Management
Auction Clearing Prices & Final Price to Capacity
Delivery Year (AEP Example)
•
•
•
BRA* Clearing Price for Limited Demand Resources (DR) ‐ $/MW‐Day
BRA Clearing Price
for Other Resources** $/MW‐Day
Final PJM Price to Capacity***
2014‐15
$125.47
$125.99
$129.28
2015‐16
$118.54
$136.00
$135.72
2016‐17
$59.37
$59.37
$59.37
$/MW‐Day
* BRA is Base Residual Auction, conducted 3 years in advance of delivery year. This is
the first – and largest – of four auctions that PJM conducts to manage overall capacity
requirements. A significant majority of resources are cleared in the BRA, and Final Price
largely reflects BRA Pricing. Clearing Price for Limited Demand Resources is what is
paid to DR resources that agree to curtail up to 60 hours per year (Limited availability).
** These are prices paid to generation and other resources that do not have the same
limits as Limited DR resources.
*** Final prices represent a blend of Limited and Other Resource prices, with results of
other all auctions factored in. This is the price charged to load in the actual Delivery Year.
2/4/2014
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15
Capacity Cost Management
Examples: For 1MW curtailment in AEP (2015/16)
DR
Curtailment Quantity
Example: 1.042 MW
Ltd. DR Auction Clearing Price (x Days)
DR Revenue
$118.54/MW-Day (x 366)
=
X
$45,208
(after applying FPR, and DR Factor for current year)
PLC Management
PJM Capacity Price (x Days)
PLC Mitigation
Example: 1.15 MW
X
Cost Reduction
$135.72/MW-Day (x 366)
=
$57,125
(after applying FPR, and ZSF current year)
2/4/2014
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16
Capacity Cost Management
Summary & Key Differences
Component
Quantity
Price
Payment
Non-performance
2/4/2014
PLC Management
DR
Notes
Based on reducing
load during 5
Coincident Peak
(CP) events
Based on amount
agreed to curtail for
up to 60 hours per
season
PLC events based on
forecast from service
provider. DR events
are called by PJM.
Based on Final
Capacity Prices
Based on BRA or IA
for Limited DR
Final Prices tend to
end up higher, up to
10% higher in recent
history
Takes effect in
delivery year
following load
reduction. Must be
coordinated with
Retail Supplier
Takes effect in fall of
current delivery year.
Must be arranged
with Capacity
Services Provider
(CSP)
One year
lag/continuation for
PLC Management
No penalties
Up to 20%
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17
Capacity Cost Management via Data Analytics
Ok, we want to do something but What’s next?
• “What gets measured, gets managed…gets improved”
– Peter Drucker
• “I never guess. It is a capital mistake to theorize before one
has data. Insensibly one begins to twist facts to suit theories,
instead of theories to suit facts”
- Sir Arthur Conan Doyle
• “If you torture the data long enough, it will confess”
- Ronald Coase
2/4/2014
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18
Data Analytics
• Interval Data
o Forest v. Trees
• Heat Maps
o Show overall operating pattern and performance
• Duration Curves
o Show peak demands, operating levels, operating configurations
o Allow for review of Distribution Demand management, capacity
and transmission cost reductions, demand response and ECMs
• Typical Periods
o Provide views of connected loads and operating schedules
• Predictive Analysis
o Interval independent variable analysis
2/4/2014
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19
Interval Data Deep Dive
• Weather Sensitive Loads
o Utilize hourly weather data – dry bulb temperature, humidity,
wind speed, wind direction, solar gain, precipitation
o Hourly (or less) load response
• Hourly Sensitivities and Drivers
o Production and weather
o Correlations and coefficients can be used to flag
system issues and performance
o Performance can be linked back to specific Energy
Conservation Measures
o Data can be used for measurement and verification
• Compare Service/Production Data with Energy Usage
2/4/2014
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20
Load Duration Curve
•
•
•
2/4/2014
Region 1 – Controllable Load to shave peak demand
Region 2 - Potential for Interruptible load
Region 3 – Energy Efficiency for permanent demand reduction
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21
Hourly Load during 2013 Capacity setting days in AEP
Management of load during 5 Capacity peaks can lead to a
reduction in capacity costs for the following year
2/4/2014
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Heat Map
•
•
2/4/2014
Show overall operating pattern and performance
Determine off-hour usage
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23
How do we use these tools?
• Understand customer’s usage patterns
• Identify opportunities for capacity management
• Implement executable actions
2/4/2014
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24
Heat Maps
Customer is managing capacity costs
2/4/2014
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25
Customer Profile - A
• Increased usage during CP
setting/Potential DR hours
• Possibility to shift load
2/4/2014
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26
Customer Profile - B
• Flat load over a 24 hour
period
• Limited opportunity to
curtail
2/4/2014
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27
Customer Profile - C
• The load profile seems to indicate heavy usage during the evening hours
• The nature of the business may not render curtailment as an option
2/4/2014
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28
Summary
• Capacity Prices in PJM are based on customers PLC
• There are a couple of ways through which a
customer can manage or offset their capacity costs –
PLC Mitigation and Demand Response
• Data Analytics can help design curtailment strategies
to maximize profitability
2/4/2014
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29
Questions and Follow Up
Ritesh Tipnis, Ph.D.
Manager, Products
AEP Energy
(312) 488-5020
[email protected]
Special thanks to the Energy Management Team at AEP Energy, especially
Scott Slisher, George Deljevic and Jacob Stoll
2/4/2014
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30