An Overview of the effects of the SWIS Market on Generators
Speaker: Professor Joseph K. Winsen, University of Newcastle
When: 2006-10-12 11:00:00
Venue: 78-621
Host: Dr ZY Dong
Abstract:Capacity payments:
- generators/interruptible loads etc. register MW capacity to
provide reserves and receive Reserve Capacity Credits, two years
in advance of the "capacity year" (WPG registered capacity
3,152.8MW for the year October 07 to September 08)
- retailers/loads are assigned a reserve capacity obligation to
obtain credits held by generators/interruptible loads
- trade in credits between generators and retailers can be
undertaken bilaterally and/or via an IMO auction (if needed); a
cap on price of credits of $150K/MW p.a.; payments are settled
monthly in the capacity year itself ($127,500/MW p.a. for 2007/8)
- WPG will have bilateral contracts with WPR imposed via "vesting"
contracts (precise details of price and duration not yet
finalised)
- if there is plant failure in a capacity year, then refunds of
capacity payments required; total refunds in year cannot exceed
receipts, but pattern of refunds is not linear (i.e., not an equal
amount per day), so "refunds" early in capacity year can exceed
initial monthly receipts (peak penalty 8, off-peak 2, daily max 5,
of 1/2 hr amount)
Energy payments:
- bilateral forward contracts also to be negotiated for energy,
specifying payments for energy in each half-hour of each day (MWh
and $/MWh); the initial few years will once again be covered by
the imposed "vesting" contracts between WPG and WPR; terms (MWh
and $/MWh) yet to be disclosed
- the resulting contracted energy commitment of market participants
for each half-hour of the dispatch day (known as the "trading"
day) can be altered on each previous day (known as the
"scheduling" day) via trading in the STEM (short-term energy
market); registered capacity must be completely offered via
bilaterals/vesting and/or the STEM
STEM:
- each participant must indicate how much they require to receive
($/MWh) in each half-hour to increase their contracted energy
output in that half-hour of the next day above their
bilateral/vesting position (increased generation, or decreased
load); e.g., an increase of 50MWh (i.e., 100MW flat over the
half-hour) for $45/MWh, a further 25MWh for $65/MWh, etc., with a
cap of $150/MWh (inflation adjusted) or $385/MWh (indexed to the
price of oil) if liquid fuel is expected to be used
- Generators will need to consider their annual revenue target, and
the shortfall resulting from the bilateral capacity and energy
contracts (plus "ancillary service" contract revenue) in setting
these "offer" prices in the STEM
- similarly, participants are required to indicate how much they are
prepared to pay ("bid") in each half-hour of the next day to
decrease their contracted energy below their bilateral/vesting
position; e.g., 40MWh at $28/MWh, a further 60MWh at $18/MWh,
etc., with a floor of - $150/MWh (a generator may be paid to
decommit)
- Generators will need to understand the costs and savings of
decreasing output; WPG will be dispatched on a portfolio basis,
with flexibility to save on fuel costs and choose which plant
should run, given fuel availability and plant requirements
(subject to System Management direction to ensure system security
and reliability)
Biography:Professor Joseph K. Winsen's extensive consulting experience with
financial analysis across a wide range of industries provides a set
of high level analytical skills which can add significant value to
any advanced financial function. Many years of specialising in
Treasury areas and Corporate dealing, especially with derivative
securities and foreign exchange, have now been supplemented with
detailed knowledge of Australia's recently deregulated electricity
market - e.g., generator bidding into the spot market, and retailer
hedging in the bilateral contracts market. His analytical skills
base also includes skills in legal analysis - e.g., interpreting
legislation, regulations and court judgments as well as briefing and
working with counsel. An extensive background in cost analysis and
accounting provides additional complementary strengths. There are
few better qualified to help lead a competitive organisation in the
electricity or allied industry.
Dr. Winsen is Professor of Commerce at The University of Newcastle;
prior to which he was Assistant Professor of Business Administration
at The University of California, Berkeley. He received his Ph.D in
Accounting and Operations Research from The Ohio State University.
Dr. Winsen is a Fellow of the Australian Society of CPAs, with a
Treasury specialisation. He has taken several periods of leave from
his academic posts to implement large consultancy assignments in
industry and financial markets.
His research experience has involved a wide range of topics in the
Accounting/Finance area - e.g., he spent 12 months in England
studying the London Takeover Panel and the regulation of takeovers.
While on leave from The University of Newcastle, he was employed as
Manager-Research with Noble Lowndes (a member of the Hill-Samuel
Group) where he undertook a major review of the risk profiles of the
investment portfolios of Australia's major superannuation fund
investment managers. He also played a major role in launching and
developing Noble Lowndes' consulting business in the area of
executive incentive scheme structures. While also on leave from The
University of Newcastle, he was employed in setting up the London
operations as Managing Director of Option Technology (Europe)
Ltd. (a foreign exchange risk management adviser). His part-time
consulting experience has covered a variety of assignments including
valuing options in joint-venture mining companies, as well as
numerous training programs in Australia and South-East Asia.
In his full-time roles Dr. Winsen has been able to initiate
significant changes which have added immediate as well as long-term
strategic value in each organisation with which he has been
associated - his leadership style has been based on developing the
skills of others to encourage and enable them to deal with change.
Between 1997 and 1999 he was once again on leave from the
University, working under contract with several utilities including
Australia's largest electricity generator (Macquarie Generation)
where his responsibilities included developing Visual Basic modules
for pricing electricity derivatives ( e.g., caps and swaptions),
analysing "Profit at Risk", and developing new products to assist
electricity purchasers hedge price risk. His clients since then
have included Duke Energy International for whom he developed real
option valuation methods for energy assets, Energex Trading for whom
he developed linear programming methods to help manage gas
nominations, and Pacific Power for whom he valued NSW type 2 vesting
caps. Other clients: AGL Electricity; EdgeCap; Enron Australia;
Intergen (Australia); Ergon; Yallourn (CLP); Access Economics;
Vicpower Trading; Western Power; Genesis Power (NZ). He was an
inaugural member of NEMMCO's Participant Advisory Committee
(2001-2004). His most recent consultancy was working over 2005/6 as
a Strategy Consultant with Western Power, as they prepare for their
new electricity market scheduled to begin in September 2006.
Type: The IEEE PES QLD Chapter seminar, ITEE Energy Systems Research Seminar
Contact:Dr ZY Dong, seminar host (zdong@itee.uq.edu.au)
or Guido Governatori (ITEE seminar co-ordinator)
(guido@itee.uq.edu.au)