LMP Basis Risk & Mitigation Strategies

LMP Basis Risk and Mitigation Strategies

July 25-26, 2022 | Online :: Central Time

This course examines basis risk, an essential and complex concept, applied in nodal wholesale markets under certain contractual arrangements. Often overlooked or misunderstood, the risk is one that renewable developers often have to build into their project development financials.  Underestimating basis risk or failing to assess and quantify it can weigh down renewable energy projects, even after an otherwise solid due diligence and bidding process.

The methodology presented in this program will benefit anyone with interest in basis risk, such as on a renewable energy project development team that deals with estimating, trading, negotiating and decision-making that must take into account current and future local marginal prices (LMPs) in wholesale electric markets.  Following a review of LMP basis risk assessment, real-world situations will be dissected using publicly-available data and scenarios.  Case studies and worked examples using analytical tools will illustrate the impact of LMP basis risk on the “bottom line” of renewable energy projects.  And subject matter experts will discuss best practices to address:

  • What makes a credible LMP basis risk forecast under uncertainty?
  • How should I price LMP basis risk in my proposed project?
  • How can I mitigate LMP basis risk in existing and upcoming projects?

For those attendees who want to see numerical examples of basis calculations, an optional related workshop is dedicated to exposing the mathematics that solve for “what-if” examples.

Learning Outcomes

Using real-world situations and illustrative examples, this instructional course will:

  • Identify the economic dimensions that influence LMP basis risk in a project
  • Analyze the monetary impact that LMP basis risk can have on a project
  • Define what aspects of LMP basis risk can be controlled
  • Examine what aspects of LMP basis risk can’t be controlled
  • Evaluate the different “flavors” of curtailment and how they affect LMP basis risk
  • Illustrate how to forecast LMP basis risk and why that’s important
  • Assess mitigation methods to address LMP basis risk

Agenda

Monday, July 25, 2022 : Central Time

8:45 – 9:00 a.m.
Log In and Welcome

12:45 – 1:30 p.m.
Lunch Break

9:00 a.m. – 5:00 p.m.
Course Timing

 

9:00 – 9:15 a.m. :: Overview and Introductions

9:15 – 10:30 a.m. :: Setting the Stage

  • What is basis?
  • What is basis risk?
  • Relationship of basis to PPA pricing

Prediction Under Uncertainty – Drivers

  • Preliminary estimation
  • Components of basis
    • Marginal congestion – transmission constraints and congestion
    • Marginal loss pricing
  • Capacity consideration
    • Underlying energy flow on every line
    • Over-build
    • Correlation of renewable production
  • Other elements
  • Scenarios

10:30 – 10:45 a.m. :: Morning Break

10:45 a.m. – 12:45 p.m. :: Prevention – What Can Be Controlled

  • “Landscape” considerations
    • Market dimensions
    • Business
  • Location
  • In-service context
    • Component(s)
    • Timing
    • Relative system compatibility
  • Assessing transmission line constraints
  • PPA terms negotiation
  • Consultant studies

12:45 – 1:30 p.m. :: Lunch Break

1:30 – 3:00 p.m. :: Risks – What Can Not Be Controlled

  • Transmission network
    • Outages
    • Upgrades
  • Competitive financial and economic conditions
    • Project-specific
    • System supply stack configuration
  • Policy shifts
    • Fuel-based and/or environmental mandates
    • Tax incentives and structuring
  • Market dynamics
    • Administrative measures
    • Supply stack composition
    • Commodity pricing

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 5:00 p.m. :: Mitigation Measures After Commercial Operation Commencement

  • Market bidding strategies
  • Congestion management strategies
  • Transmission infrastructure
    • Elective
    • Non-elective
  • Remedial action schemes (RAS)
  • Storage

Common Mistakes that Project Developers Should Avoid

 

The Cycle of Basis Evolution – and Why That’s Important

5:00 p.m. :: Course Adjourns for Day

 

Tuesday, July 26, 2022 : Central Time

8:45 – 9:00 a.m.
Log In

9:00 a.m. – 12:15 p.m.
Course Timing

 

9:00 – 9:45 a.m. :: What It Means to “Wear” Basis Risk

Wearing basis risk skillfully often separates a successful renewable energy project from one that does not hit all its financial marks.  EDF Renewables, a leading North American independent power producer, will discuss approaches and methodologies to forecasting basis risk including production cost simulation modeling, strategies for risk mitigation including sponsored upgrades, FTRs, transmission planning advocacy and grid-enhancing technologies.

9:45 – 10:30 a.m. :: Scoping for Congestion Basis Studies

This discussion will cover a typical scope for congestion basis studies, including how certain key assumptions are determined and validated; typical results and outputs that a basis study should include; and, key observations on basis risk-based on markets and technology.  nFront, a leading consultancy in the congestion assessment arena, will discuss best practices gleaned from many years of basis studies for renewable projects across the U.S. and technologies.

10:30 – 10:45 a.m. :: Morning Break

10:45 – 11:30 a.m. :: Regulatory Elements That Impact Congestion Risk In The Market

The presentation will delve into key transmission and market rules and processes that can impact congestion risk in the market.  The Brattle Group will examine opportunities for new transmission build under RTOs’ transmission planning processes and interconnection studies and FERC policy, as well as other market developments with impact on congestion patterns.  These include aspects such as power-gas market coordination, distributed resources and generation retirements.   

11:30 a.m. – 12:15 p.m. :: Addressing LMP Basis Risk through System Reconfiguration Services

Reconfiguration services are an important tool in relieving constraints that contribute to LMP basis risk confronting renewable energy IPPs, load serving entities, and RTOs.  This presentation will provide examples of type of constraints that can be addressed by reconfiguration and how topology optimization can be a win-win for the market by materially reducing or eliminating congestion on limited facilities on the grid within short lead times.  NewGrid, a firm that specializes in the deployment of reconfiguration services, will discuss the challenges and barriers to topology optimization and other grid-enhancing technologies (GETs) that can reduce basis risk.

Workshop

The Mechanics of Calculating LMP Basis Risk

Tuesday, July 26, 2022 : Central Time

Overview

This workshop is dedicated to exposing the mathematics for solving “what-if” examples.  It is designed for those attendees who want to understand what some people call “magic”.  The workshop is complementary to the primary course, converting the principles and practices into specific, computational scenarios and will incorporate exercises to illustrate methods that do not require black-box models.

Workshop attendees are encouraged during the workshop to have a computer available.

 

Learning Outcomes

Using illustrative examples and supplied data, this workshop will:

  • Examine the fundamental drivers of pricing basis risk
  • Review LMP basis risk calculation methods
  • Reinforce understanding through experiments using commonly encountered conditions

Agenda

12:45 – 1:00 p.m.
Log In

1:00 – 5:00 p.m.
Workshop Timing

 

1:00 – 1:15 p.m. :: Overview and Introduction

1:15 – 3:00 p.m. :: Framing the Problem

  • Relationship between curtailment and basis risk for a finite amount of required curtailment
    • Prediction of curtailment from duration curve of net excess supply
    • Application to solar [and storage] resources
    • Basis risk for wind projects
    • Correlation between multiple resources operating simultaneously
  • Prevention analysis
    • Choosing between two candidate points of interconnection (POI) for a given project
      • Evaluating longer generation lead line build vs selection of a different line
      • Scoping the right MW size for a solar project at a given location
      • Scoping the right MW size for a wind project

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 5:00 p.m. :: Put a Number to It

  • Analyze a situation
  • Quantify basis risk under uncertainty
  • Try 2-3 mitigation alternatives
  • Cost-benefit calculation
    • Compare NPV of CAPEX for mitigation to NPV of basis reduction it might achieve

5:00 p.m. :: Workshop Adjournment

SUBJECT MATTER EXPERT CONTRIBUTORS

Neil Copeland is Director of Transmission & Delivery at nFront Consulting.  He has some two decades experience in the energy industry with a specialty in generation and transmission economic analysis.  Mr. Copeland’s expertise includes the following areas: Nodal Congestion & Curtailment Analysis, Long Range Resource Planning & Market Price Forecasting, Asset Valuation & Transactional Due Diligence, Nodal Market Cost/Benefit Analysis, Transmission Investment Analysis.  He has completed numerous consulting engagements for stakeholders that include regulatory agencies, project developers, load-serving entities, generating companies, private equity firms and investment banks. Mr. Copeland also has extensive experience with the use of commercial price forecasting tools such as the ABB/Ventyx PROMOD IV® software.  He holds Mechanical and Nuclear Engineering degrees from the Georgia Institute of Technology.


Rodica Donaldson is Senior Director of Transmission Analytics at EDF Renewables North America, an independent power producer and service provider with 35 years of expertise developing and operating renewable energy projects.  In her current role, she heads a group responsible for forecasting and mitigating transmission congestion and curtailment risks for EDF Renewables assets.  She has worked for EDF since 2008, Ms. Donaldson earned a Master of International Business from Paris Dauphine University after starting her studies at the Bucharest University of Economic Studies.


Nicholas Pratley has more than three decades of experience in power systems engineering and analysis, including 15 years simulating wholesale power markets in the U.S., Canada and Europe. His clients have included transmission owners, municipal utilities, electric co-ops, generation developers and power traders.  He holds bachelor’s and master’s degrees in Electrical Engineering from McGill University and the University of Montreal.


Pablo Ruiz is the co-founder, CEO and CTO of NewGrid, a software company in the electric power transmission industry, and a Senior Associate at The Brattle Group, an economic and financial consulting firm.  He is an electrical engineer with more than 15 years of experience in electric power systems analysis, research and software development.  Dr. Ruiz specializes in power system operations and planning, renewable power integration and the modeling, analysis and design of wholesale electricity markets.  He is also affiliated faculty with the Boston University Institute for Sustainable Energy, where he is a Research Associate Professor of Mechanical Engineering. His research focuses on electric power systems operations and planning, renewables integration to the power grid, electricity markets analysis and design, coordination of gas and electric infrastructures, and energy policy.  Dr. Ruiz earned a BS in Electrical Engineering from the Universidad Tecnologica Nacional, a MS in Electrical Engineering from University of Illinois and PhD in Electrical and Computer Engineering from the University of Illinois.


Toskiki (Bruce) Tsuchida is Principal at the Brattle Group, where he specializes in the analysis of wholesale electric markets and modeling, including operations, valuations of transmission and generation assets, deliverability analyses, RTO cost benefit analyses, market power studies, and contract evaluations.  His experience spans a wide range of utility consulting projects, including the analysis of operations for power markets, ranging from integration studies for intermittent resources such as wind and solar power, ancillary service studies, operational logic studies, and analyses required for regulatory proceedings. Mr. Tsuchida has evaluated both transmission and generation assets and contracts for electric power markets throughout North America, as well as in the UK, Spain, the Netherlands, and Saudi Arabia.  Prior to joining Brattle, he was a principal at Charles River Associates.  Mr. Tsuchida was also a project manager at the Tokyo Electric Power Company (TEPCO), where he oversaw international generation development projects and was the lead engineer for Southeast Asia generation units. While at TEPCO, he concentrated primarily on the design, construction, operation, and maintenance of thermal power plants.

Online Delivery

We will be using Microsoft Teams to facilitate your participation in the upcoming event. You do not need to have an existing Teams account in order to participate in the broadcast – the course will play in your browser and you will have the option of using a microphone to speak with the room and ask questions, or type any questions in via the chat window and our on-site representative will relay your question to the instructor.

  • IMPORTANT NOTE: After November 30 you will not be able to join a Teams meeting using Internet Explorer 11. Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
  • You will receive a meeting invitation will include a link to join the meeting.
  • Separate meeting invitations will be sent for the morning and afternoon sessions of the course.
    • You will need to join the appropriate meeting at the appropriate time.
  • If you are using a microphone, please ensure that it is muted until such time as you need to ask a question.
  • The remote meeting connection will be open approximately 30 minutes before the start of the course. We encourage you to connect as early as possible in case you experience any unforeseen problems.

Register

Please Note: This event is being conducted entirely online. All attendees will connect and attend from their computer, one connection per purchase. For details please see our FAQ

If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for three business days after the event

REGISTER NOW FOR THIS EVENT:

LMP Basis Risk and Mitigation Strategies

July 25-26, 2022 | Online
Individual attendee(s) - $ 1295.00 each

Volume pricing also available

Individual attendee tickets can be mixed with ticket packs for complete flexibility

Pack of 5 attendees - $ 5,180.00 (20% discount)
Pack of 10 attendees - $ 9,065.00 (30% discount)
Pack of 20 attendees - $ 15,540.00 (40% discount)

RELATED WORKSHOPS:

The Mechanics of Calculating LMP Basis Risk

July 26
Individual attendee(s) - $ 495.00 each

Volume pricing also available

Individual attendee tickets can be mixed with ticket packs for complete flexibility

Pack of 20 attendees - $ 1980.00
Pack of 20 attendees - $ 3465.00
Pack of 20 attendees - $ 5940.00

Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before June 24, 2022 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of conference cancellation, EUCIs liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800

CEUs

Credits

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EUCI is accredited by the International Accreditors for Continuing Education and Training (IACET) and offers IACET CEUs for its learning events that comply with the ANSI/IACET Continuing Education and Training Standard. IACET is recognized internationally as a standard development organization and accrediting body that promotes quality of continuing education and training.

EUCI is authorized by IACET to offer 1.0 CEUs for this event and 0.4 CEUs for the workshop

Instructional Methods 

This program will use PowerPoint Presentations and group discussions. 

Requirements For Successful Completion Of Program 

Participants must log in each day and be in attendance for the entirety of the event to be eligible for continuing education credit.


Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion.

Course CPE Credits: 11.5
Workshop CPE Credits: 4.5
There is no prerequisite for this Course.
Program field of study: Specialized Knowledge
Program Level: Basic
Delivery Method: Group Internet Based
Advanced Preparation: None

CpeEUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

 

Who Should Attend

Representative Organizations

  • Renewable energy independent power producers (IPPs)
  • Renewable energy project sponsors and investors
  • Renewable energy project lenders
  • Load-serving entities (LSEs) and utilities
  • Local distribution companies (LDCs)
  • Merchant power ventures
  • Merchant transmission providers
  • Wholesale trading companies
  • Power marketers
  • Energy service providers/companies (ESPs/ESCOs)
  • Smart grid resource providers
  • Demand response providers/aggregators
  • Large energy customers
  • Consumer advocates
  • Regulatory counsel
  • State regulatory staff

Responsibilities

  • Origination
  • Valuation and project finance
  • Resource operations
  • Scheduling and forecasting
  • Asset management and optimization
  • Marketing and business development
  • Financial marketers
  • Power trading
  • Power supply analyst
  • Contract administrators and analysts
  • Energy management
  • Revenue assurance
  • Energy operations and supply
  • Retail load supply
  • Structured power
  • Bulk power
  • Energy finance and analysis
  • Confirmation administration

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