The Texas Experience: Implications of 8,000+ MW Wind Generation Resources In ERCOT. David Campbell CEO, Luminant 2009 Summer Seminar August 3, 2009

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1 The Texas Experience: Implications of 8,000+ MW Wind Generation Resources In ERCOT David Campbell CEO, Luminant 2009 Summer Seminar August 3, 2009

2 Growth of Wind Generation in ERCOT MW 12,000 10,000 8,000 6,000 4,000 Cumulative Planned (Signed Interconnection Agreement) Cumulative MW Installed Cumulative Planned (Signed Interconnection Agreement) Cumulative MW Installed ,785 8,005 8, ,135 9,418 1,283 8,135 10,085 1,950 8,135 10,63 8,135 2, , Year Source: ERCOT System Planning Report to the June 11, 2009, ERCOT Reliability and Operations Subcommittee Meeting ERCOT has experienced 60 percent average annual growth in wind capacity since Current estimates are that 2009 will see an additional 11 percent growth relative to

3 Wind Generation Development in ERCOT Existing MW Wind Generation Wind Project Under Full Studies Wind Project With Signed Agreements Source: ERCOT System Planning Report to the June 11, 2009, ERCOT Reliability and Operations Subcommittee Meeting In addition to the 8,135 MW of wind in operation today, ERCOT reports an additional 2,501 MW have signed generator interconnect agreements (blue circles) and an additional 31,159 MW are undergoing full interconnect studies (green circles). 3

4 The Texas Wind Transmission Plan: Investing $5.0 Billion to Enable 18,500 MW of Wind Generation ERCOT is leading the nation in expediting transmission to move power from the wind zones to the more populous areas. 4

5 Increased Wind Capacity s Impact on ERCOT Market Dispatch Wind On The Margin (MCPE < $0) vs. Installed Wind % intervals - WZ % intervals - NZ Installed Wind Capacity MW 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 More installed wind has resulted in more local OOME down 35% 30% 25% 20% 15% 10% 5% Intervals 0 0% Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Mar 08 had an outage that reduced the limit Month The amount of wind-on-wind competition has increased significantly in the West Zone due to west-north congestion and in the broader market due to surplus night capacity, driving frequent negative price intervals. 5

6 Local Congestion Resulting From Increased Wind Generation Wind Out-of-Merit Energy-Down Cost vs. Installed Wind $14 WIND OOME DN Installed Wind 9,000 $1,000,000 / Wind OOME Down Payments $12 $10 $8 $6 $4 $2 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 MW of Installed Wind $0 0 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Month Source: ERCOT, OOMC and LC Energy Payments as of 6/12/09 report Much of the wind in West Zone is currently experiencing local congestion in addition to the west-north zonal congestion. With the implementation of the Texas nodal market, the OOME-Down payments for this congestion will be eliminated. 6

7 Wholesale Price Capture of West Zone Wind Farms 100.0% Percent Capture Of WZ MCPE By Wind 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Ignoring OOME Down Wind Volumes Including OOME Down Wind Volumes Source: ERCOT As west-north congestion and wind-on-wind competition have increased, the percent capture rate of market prices (West Zone MCPE) has fallen. This decline is even more pronounced when adjusted to reflect the OOME-Down MWh that are paid as if producing. Note: In this analysis all wind production has been assumed to reside in the West Zone. Some small amount of the total is now located in North and South zones 7

8 Non-Spin Capacity Required to Backstop Variability of Wind Supply in ERCOT Annual Average Non-Spin Requirement By Hour thru June MW Hour Ending Source: ERCOT In 2009, ERCOT started procuring non-spin based on net load error by calculating the historic load forecast error in MW and the total wind output forecast error and adding the two for each hour of the day, resulting in a 90% increase between 08 and 09. 8

9 Wind Availability During ERCOT s Record-Setting Peak Loads Peak: 62,786 MW July 8, 2009, Hour Ending: 5 P.M. Peak: 63,453 MW July 13, 2009, Hour Ending: 5 P.M. Wind 1,630 MW 20% Wind 21% 1,690 MW Nuclear 5,000 MW 100% Nuclear 5,000 MW 100% Coal 14,250 MW 92% Coal 14,860 MW 96% Online Available Capacity Source: ERCOT and public data Wind achieved ~20% capacity factors during ERCOT s recent record-setting peaks 9

10 Luminant s Generation Mix At ERCOT s Record Peak July 13, 2009, Hour Ending 5 P.M. Nuclear Lignite Gas Steam/CT Wind Wind MW under PPAs ~18% of Luminant s total wind capacity was available at peak load 10