In-Depth Seminar: Today's U.S. Electric Power Industry, ISO Markets, Renewable Energy, and Heat Rate/Tolling Transactions

Instructor

Training Sessions

Session 1: Introduction to the U.S. Electric Service System

1. The properties of electricity including voltage, AC power, direct current, reactive power (vars) and other electric power terms and concepts.
2. The basic concept of how AC electromagnetic generators and AC motors work, and why reactive power can be an important issue for industrials and solar generation resources.  
3. The difference between real power (MW) and electrical energy (MWh), and why the power industry can have negative prices during off-peak hours.
4. An overview of the North American electric service system (T&D wires and generation), and how it functions.
5. How power moves across transmission lines, and what line losses, shrinkage, var support, ancillary services, and parallel flows are.
6. The difference between AC and DC high voltage power lines.
7. How the North American power industry is set up, the locations of the six North American AC power grids, and how the electric bulk transmission and distribution systems are structured.
8. What control areas and balancing authorities are, and how they "keep the lights on.".
9. What the definition and role is of the AGC system, spinning reserve, quick start capacity and load shedding.
10. How control areas, balancing authorities, and ISOs prepare the pre-hour operating schedule, and why ISOs and RTOs are fundamentally just large control areas.
11. How the re-dispatch of generating units can impact the availability of power line transmission capacity.
12. What the terms lambda and security constrained-environmental-economic dispatch mean.

Session 2: Fundamentals of the U.S. Electric Power Industry

1. A brief summary of the structure and function of the six North American AC power grids.
2. Who the participants are in today's electric power industry, and what their respective roles and perspectives are.
3. The differences between ISO "organized" market structures and the bilateral world of the non-ISO areas in the Southeast and West.
4. A summary of utility cost-of-service regulation, rate cases, tariffs, and why regulated utilities are not fans of conservation, demand response, DSM, roof top solar, and distributed energy resources ("DER").
5. Open (direct) access retail and wholesale competitive markets, and how we arrived at today's bifurcated marketplace.
6. State versus federal jurisdiction issues, the role of the courts, why Chicago is an island of PJM, and why "No one is in charge."
7. What ISOs, RTOs, balancing authorities, and merchant ITCs are, and how these participants function and interact.
8. A map of the current U.S. ISOs and RTOs and how we got to where we are today.
9. Why the restructuring of the North American electricity markets is such a complicated issue at all four levels- operating, economic, regulatory, and political.
10. The difference between ISOs, RTOs, and the California EIM.
11. The definition of for-profit merchant HV transmission power lines, OATT tariffs, and market-based transmission rates.
12. Why it is so difficult to build HV power lines and restructure the industry,.
13. A summary of today's key industry issues and where the U. S. electric power industry is headed.
14. The major issue of state generation subsidies and Zero Emission Credits ("ZECs").
15. The definition of Locational Marginal Pricing ( "LMP" or "LBMP" ) and a brief discussion of its use.
16. What the difference is between NERC and FERC.
17. A brief summary of what the terms resource adequacy, "capacity", and California's FRACMOO, and why these are important issues.

Session 3: Day Ahead Energy Auctions, LMP, and ISO Virtual Power Transactions

1. A clear explanation of how the ISO/RTO day-ahead two-settlement energy auctions work.
2. How an ISO functions as a non-profit semi-firm clearinghouse.
3. Real world adjustments and generator restrictions that have turned ISO auctions into a semi-competitive/semi-administrative market.
4. What Locational Marginal Pricing ( "LMP" or "LBMP" ) is and how it is used.
5. The difference between Day-Ahead LMP, Hour-Ahead LMP, and Real Time LMP and how these these three markets relate to each other.
6. What generator offer price caps and the generation "stack"are, and some of the the obligations created when generators receive capacity or resource adequacy payments.
7. The definition of the terms operating reserve allocation, accounting true-ups, uplift/make whole payments, and Extended LMP.
8. Virtual/Convergence Bidding, Incs/Decs, and Dart swaps.
9. What the terms LSE, QSE, SC, and FTR/CRR/TCC mean, and why they are important.
10. A brief overview of FTRs/CRRs/TCCs/TRs (Hint: They are the same financial product with different names.)

Session 4.1: Fundamentals of Renewable Energy, Demand Response, and Distributed Energy Resources - Part 1

1. A summary of the capital and levelized costs of solar and wind generating resources, and how these costs compare with fossil fuel, nuclear, and other traditional sources of electricity supply.
2. An overview of onshore and offshore wind energy and the challenges it faces.
3. The differences between utility scale solar, community solar, and roof-top solar, and the pros and cons of each. Note: This seminar will not have time to address renewable energy resources other than wind and solar.
4. What "firm solar" and "firm wind" are, and what the role of grid-scale batteries is.
5. Federal versus state regulatory/legal authority: Who has jurisiction for what, and why it matters.
6. Why it is so difficult to build new power lines in the United States.

Session 4.2: Fundamentals of Renewable Energy, Demand Response, and Distributed Energy Resources - Part 2

1. What demand response, demand side management ("DSM"), and the smart grid are, and why these resources are effectively virtual generating plants that compete with physical generating assets.
2. The challenges to the electric power grid presented by roof-top solar and other forms of distributed energy resources ("DER").
3. Why FERC Order 872 issued in July 2020 may make things more difficult for developers of distributed energy resources.
4. How the regulated electric utility business model is threatened by DER, DSM, demand response, conservation, and the smart grid, and why regulated electric utilities behave the way they do.
5. What the California Duck Curve and FRAC-MOO are, and why these issues are important.
6. What renewable energy credits (RECs) and power purchase agreements (PPA's) are.

Session 5: Introduction to Heat Rates, Spark Spreads, Tolling Deals, PPAs, and Heat Rate Linked Power Transactions

1. What operating and market implied heat rates are, and how they are expressed.
2. The difference between a generating plant's operating heat rate and its economic or conversion heat rate.
3. How to correctly convert coal, oil and natural gas prices to equivalent electric power prices.
4. How to correctly calculate fuel quantities. (For example, how many MMBtus per day of natural gas is required to serve a 50 MW on-peak power deal?)
5. What spark spreads and dark spreads are.
6. The basics of a spark spread trade, and why merchant generating assets are call options on the spot spark spread.
7. What the difference is between a tolling arrangement, power purchase agreement, and heat rate deal.
8. What forward and reverse "tolling deals" are, and what can go wrong.
9. How heat-rate-linked power transactions can hedge a generator's cross-commodity risk.
10. How heat rate deals can be combined with natural gas futures, options, and swaps to manage electricity risk and structure profitable transactions.
11. How a heat-rate-linked power transaction and henry Hub natural gas futures contracts can be combined to hedge electricity price risk. (Example #1)
12. How a  heat-rate-linked power transaction  can be used to sell solar electricity tied to natural gas prices under a multi-year power purchase agreement, and how to financially convert this natural gas determined revenue stream to a fixed sales price for project financing purposes. (Example #2)
13. How a heat rate transaction and natural gas financial option can be combined to offer a customer a price cap on physical electricity, thereby virtually mimicking one of the benefits of owning a physical electric generation asset. (Example #3).