PPA Route to Market Imbalance Risk Analysis An

Transcript:PPA Route to Market Imbalance Risk Analysis An:
PPA Route to Market Imbalance Risk Analysis An Update Oliver Rix 12th April 2013 Introduction Outline Methodology Historic Imbalance Prices Modelling of Probabilistic Distributions Future Imbalance Cost and Risk (On-Going Analysis) Questions Imbalance Risk Analysis Agenda Imbalance Risk Analysis Introduction In response to recent evidence that independent generators are finding it increasingly difficult to secure commercially viable power purchase agreements (PPAs), the Department of Energy and Climate Change (DECC) issued an open call for evidence to the industry in April 2012. This analysis supports the qualitative findings from the call for evidence responses and looks to quantify the present and future risk associated with imbalance costs and the materiality of this for generation projects. An empirical data set of historic generation volumes and cash-out prices is used to build probabilistic distributions of the key variables for different asset types to enable simulation of imbalance costs. Appropriate sensitivities can then be applied to assess potential future imbalance cost and risk. An insight into historical imbalance costs A modelled imbalance risk for different generation types based on historic data Future potential imbalance risks and costs for different generation types Project Introduction Analysis Goal Analysis Rational Analysis Outputs Imbalance Risk Analysis Context Market participants buying and selling physical power are responsible for their own balancing on a half-hourly basis. To the extent that a participant’s net position based on generated volumes, customer demand and wholesale purchases and sales is not zero, this is treated as an imbalance and settled against ‘cash-out’ prices. The cash-out price that is applied to the imbalance depends on the direction of the imbalance relative to the overall system imbalance: where the imbalance ‘helps’ at the system level, a market-related price is applied, whereas if the imbalance exacerbates the overall system position, a price is applied reflecting the System Operator cost of balancing (“System Buy Price” or “System Sell Price”). SBP/SSPs can be at a significant and volatile premium/discount to the underlying wholesale price. GB balancing arrangements recap GRAPH – sample time series of MIP/SBP/SSP Imbalance Risk Analysis Wind asset assessment The actual imbalance accruing to participants will be a function of their portfolio and trading strategy. We are aiming to isolate the element of imbalance that can be attributed to uncertainty in relation to the level of outturn generation from an asset. We have used public domain data for transmission-connected assets (BM Units). Final Physical Notifications (FPNs) represent