4. Supply and Demand I - Contracting Price Flashcards
Capacity Factor
Utilization rate of an asset - the percentage of time that an asset produces at its maximum rate. Multiplying the CF by 8760 (# of hours in a year) results in Expected Annual Production. The CF can decrease over time.
Heat Rate
Amount of fuel required to generate one unit of electricity. Measure of efficiency of conversion from fuel to electricity. Denominated as a rate in which energy fuel is converted to kWh (ex: MJ/kWh)
Rate Case
Process by which PUCs set prices to be charged to customers. Usually a regulatory commission oversees the proceeding. Primary instrument of government regulation of utilities.
Stranded Costs
Existing investments in infrastructure for incumbent utilities that may become redundant in a competitive environment.
Emissions
Release of gases from energy production, often with adverse environmental effects
CHP
Cogeneration or combined heat and power (CHP) is the use of a power station to simultaneously generate electricity and useful heat. CHP can be compared with energy sources that provide both power generation and another service. It is an opportunity for savings in costs and energy as it recovers heat; in some case efficiency has been improved from 30% to 80%
Capacity Markets
Forward markets set up to ensure supply is available when needed most and have the effect of encouraging investments in additional assets. Owners of generating capacity (i.e. power plants or demand response providers) make their capacity available to forward markets for future delivery at 3 or more years out. Providers are paid on a KW per year basis for the capacity. Prices can vary as they are bid in at AC (Total not VC)
Organized Market
Market allowing buyers to offer to participate and sellers to bid for their services and then ensures that the most willing participants on each side are the ones that end up transacting or “clearing the market” at some reasonable price. Can be in the form of forward markets, day-ahead markets, and real-time markets
Discount Rate
Rate used to determine the present value of future cash flows over a period of time. Measure of the time value of money as well as the risk or uncertainty of future cash flows
Supply Stack
Collection and aggregation of bids. Electricity generators bid into the wholesale market the amount of electricity they produce at their marginal cost.
Merit Order
Prioritization by lowest cost. Ensures the lowest cost producers are the first ones called on, followed by the next lowest until load is met
Market Clearing Price
Equilibrium price where all profit opportunities for sellers and all benefit opportunities for buyers have been exhausted. Electricity markets use a reverse Dutch auction
Marginal Cost
Cost to produce one more or one less unit of something. Generators are willing to sell into the market as long as the price received is more than costs
LCOE
Levelized Cost of Electricity: sums all cost elements on a consistent basis involved in the creation, operation, and fueling of an asset and divides that total cost evenly over the output of the asset. Often denominated as cents/kWh. Key errors are the assumptions about performance of an asset and false comparisons to other generators
Busbar
A substation connection device where electricity is priced and delivered into the grid
Busbar Costs
Also referred to as the LCOE. Once electricity reaches the grid, it is difficult to further directly attribute additional costs of transformation to the output of that single generator
Overnight Cost
The cost of completing the generation asset and putting it into service as if it were to happen overnight. Denominated in units of power ($/W) and incurred once. Known at the time of construction.
Fixed O&M Cost
The operating and maintenance costs required to keep the asset at full operating capacity before it is used to produce the first unit of output. Includes site maintenance, staffing, cleaning, etc. Denominated as a cost per unit of capacity that must be incurred each year ($/W per year)
Variable O&M Cost
Maintaining the plant becomes costlier as it is used. Maintenance will be determined on a marginal basis. Typically determined on a cent/kWh basis
Prime Mover
Machines used to transfer primary kinetic and potential energy sources into directed and concentrated forms to produce mechanical work
Bid Stack
Bids arranged by merit order form bid stacks. The spot price is set by finding the highest bid stack needed to match demand
Load Duration Curve
Illustrates the relationship between generating capacity requirements and capacity utilization. Similar to a load curve, but the demand data is ordered in descending order of magnitude. The height of each slice is a measure of capacity, and the width of each slice is a measure of the utilization rate or capacity factor. The product of the two is a measure of electrical energy (kWH)
Induced Seismicity
Earthquake activity resulting from human activity (often tied to fracking)
Run-of-river
Applied to hydro plants: a low-head plant using the flow of a stream as it occurs and having little or no reservoir capacity for storage
