EnergyNewswatch

LMP Basis Risk and Mitigation Strategies

Live Streaming Online March 21-22, 2023

An EUCI Program

Click Here to register $1295

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

This course examines LMP basis risk, an essential – but often overlooked or misunderstood – concept that renewable developers must build into their project development financials.  Failure to assess and quantify LMP basis risk can weigh down renewable energy projects so they find themselves “underwater”, even after an otherwise solid due diligence and bidding process.

The methodology presented in this program will benefit anyone on a renewable energy project development team who 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 understand what some people call “magic”, 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

Agenda

TUESDAY, MARCH 21, 2023

9:00 a.m. – 5:00 p.m. Central Time

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

All Day One Content Delivered by…

Nicholas Pratley, Associate Director – Commercial Transmission & Market Analytics, EDF Renewables

5:00 p.m. :: Course Adjourns for Day

WEDNESDAY, MARCH 22, 2023

9:00 a.m. – 12:15 p.m. Central Time

9:00 – 9:30 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.

Rodica Donaldson, Senior Director – Transmission Analytics, EDF Renewables North America

9:30 – 10:00 a.m. :: Regulatory Elements That Impact Congestion Risk In The Market

This presentation will delve into key transmission and market rules and processes that can impact congestion risk in the market.  It 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.

Bruce Tsuchida, Principal, The Brattle Group

10:00 – 10:30 a.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.

Pablo Ruiz, Co-founder CEO & CTO, NewGrid

10:30 – 10:45 a.m. :: Morning Break

10:45 a.m. – 11:15 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.

Neil Copeland, Director – Transmission & Delivery, nFront Consulting

11:15 a.m. – 12:15 p.m. :: Round-table Discussion

Neil Copeland, Director – Transmission & Delivery, nFront Consulting

Pablo Ruiz, Co-founder, CEO and CTO, NewGrid

Bruce Tsuchida, Principal, The Brattle Group

Rodica Donaldson, Senior Director – Transmission Analytics, EDF Renewables North America

Nicholas Pratley, Associate Director – Commercial Transmission & Market Analytics, EDF Renewables

Workshop

The Mechanics of Calculating LMP Basis Risk

WEDNESDAY, MARCH 22, 2023 : CENTRAL TIME

“The workshop was the best part with more interaction and numerical examples.” Senior Power Systems Engineer, EPE Consulting, LLC

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 experienced conditions

Agenda

1:00 – 5:00 p.m. Central Time

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

 

 


 
d