Coal Piles as Inventory to Model

That pile of coal in the generation yard is more than the sum of its tons.  Two lumps of coal in the same shovel load might present two points on a graph of constantly fluctuating uncertainty.

Coal piles loom as data-dense aggregates of source, grade, contract pricing, spot price, emission qualities, projected dispatch load and storage cost.  But while the complexity in that pile of coal could seem overwhelming, it’s not immeasurable.  Ascend Analytics PowerSimm will take that pile apart lump by lump and reassemble it in a model that gives utility managers a view of supply, cost, emissions, hedge pricing and projected dispatch.  It’s a view they are not going to find anywhere else.

“Nobody else can do this,” says Ascend Energy Analyst Trevor Rehm, explaining that competing software fails to project dispatch price accurately because the programs can’t dissect the coal pile the way PowerSimm does.

“We are able to deliver two different train loads of coal from different places at two different prices, blend the fuels, blend the emissions and price the whole thing optimized to dispatch to maximize profits.” – Trevor Rehm

The competitors’ models also lack Ascend’s sophisticated forward price simulations that include the market’s current liquid forward strip correlated to historical data and calculated volatilities.  Two trainloads would be a simple exercise. The PowerSimm coal inventory module can blend price and emissions grade from as many sources as there are lumps in the coal pile.  That feature offers an unprecedented advantage for portfolio managers who know that coal has cost beyond the spot and contract prices. It costs money to store coal and move coal.  With forward purchase contracts, it even costs money to leave coal in the ground.

At the same time, without an adequate supply in contracts, utility managers are forced to make spot purchases at higher rates.  For optimum profits, the coal pile has to be just the right size and that “just-right” size fluctuates constantly. “That pile is going to grow over time with deliveries and it’s going to shrink at the same time with coal burn,” Trehm points out.  With PowerSimm, portfolio managers can match the height of the pile to the depth of the demand: a pair of synchronized curves on a color-coded graph with spot market purchases ideally relegated to a sliver in the portfolio. PowerSimm simulations allow users to see that dynamic relationship and run additional simulations for changing market conditions.

Getting the size of their coal piles just right is why utilities like Tucson Electric Power are buying PowerSimm.  Where competing software products run on deterministic analysis, Ascend Analytics offer precise projections using state space modeling.  The effect is dramatic, especially now, with natural gas prices at portfolio rattling lows.  Coal plants that may have been running off peak while gas-fired generators sat idle, are now kept off line with utilities relying on lower-emission natural gas for bigger chunks of the day.  As a result, coal piles in the East and Southeast grow ominously high with costs climbing to match.  New PowerSimm features in development will warn portfolio managers long before that happens, indicating a cost penalty when forward-purchase contracts rise above an optimum threshold.  PowerSimm’s more accurate simulations coupled with the exclusive ability to view a coal pile in all its intricacy provide a competitive advantage to portfolio managers who can use hedge pricing to optimize contract purchases and see the risk exposure on the spot market.  Viewed from the loading yard, it may look like a great mass of black and soot, but PowerSimm users see the coal pile more accurately: as a set of numbers.  Competing software product might see tons.  What they see beyond that can’t match the accuracy of Ascend products.  “They don’t model the coal pile,” Rehm says.  “Or even how it became a coal pile.”  PowerSimm, Rehm says, sees the pile in all its intricacy, from the mine to the fire box, and every step in between.

Plug-In Hybrids and Plugged-in Headaches

With estimates of new electric vehicles and plug-in hybrids climbing in every research report, you can already hear politicians boasting about “electric highways” with charging stations sprouting out of the ground outside every Starbucks.

But the truth is most EV owners are going to charge up at home and how long and when they charge will ripple across the power industry, affecting everybody from early adopters accessing “smart house” applications with their iPhones to coal miners shaking the dust out of their boots.  Ascend Analytics’s PowerSimm and Curve Developer programs can help portfolio managers keep that ripple from splashing over their profits.  Modeling for load, regulations and fuel prices, Ascend products factor risk and uncertainty into decision analysis.  Electric vehicles owners promise plenty of both.

A report released in July by the Electric Power Research Institute placed their mid-range prediction at 35 million electric vehicles on the road by 2030 and pegged the annual power consumption for those cars at 80 terawatt hours.

EPRI’s more optimistic estimate brought the number of EVs on the road up to 65 million, more than doubling the electricity demand.

At either number, the impact could be dramatic when residential customers start plugging their cars into high-amp chargers all timed to click on at 9 p.m. spiking the load on a system tuned to off-peak evening hours (a study released in September noted that 89 percent of customers intend to charge their cars at home).  Businesses running fleets of EVs and plug-in hybrids could be switching their chargers to “on” at entirely different times.

Utility managers know that off-peak and on-peak load can be served by different mixes of generation assets and they know that mix will shift constantly over time with fuel prices, regulation costs, transmission upgrades and new renewables coming on line.  Ascend Analytics products can handle all of that with precision, tallying uncertainty and optimizing financial performance.

With simulations for load, spot market fuel costs, renewables, forward option volatility, weather and regulation modeled in short-term and long-range runs, utility executives can optimize their portfolio to meet the potential growth in off-peak demand.  PowerSimm models load by the hour and into the years, with portfolio managers able to look at dispatch scenarios constrained to meet a user-selected set of inputs.  PowerSimm also models renewables by site so a manager might know that the night wind picks up at a particular wind farm just in time to charge a factory fleet of plug-in hybrids.

That kind of data granularity will be indispensable to utilities and retailers customizing rate plans for homes equipped with smart meters and vehicle charging stations or business fleets drawing power under demand resource contracts.

Nobody is predicting electric vehicles will replace internal combustion autos tomorrow, but with Ascend Analytics software, portfolio managers can be ready for those changes today.

Energy Portfolio Software Emerges as Key Component For Power Industry in EPA Regulation Battle

A continuing battle over EPA emissions has left power industry professionals scrambling to keep their portfolios prepared for regulations that could seemingly lurch in any direction, but developers at Ascend Analytics say their modular, customizable energy analysis software is ready to make sense of the energy outlook no matter whichway it tilts.  The last four months have seen tectonic shifts across the regulatory landscape. In July, the EPA introduced Cross State Air Pollution Rule (CSAPR) restrictions on SO2 and NOx with a market launching in 2012 to trade emission allowances.  Less than two months later, the Obama administration delayed new ozone standards until 2013, a move widely decried by environmental activists as a surrender to big business.  But now the administration is promising to veto a GOP-sponsored bill that would impose lengthy delays on CSAPR and other upcoming emissions mandates. The Transparency in Regulatory Analysis of Impacts on the Nation act (TRAIN) was approved by the U.S. House of Representatives Sept. 23.  The act would require detailed financial analyses on the EPA rules’ impact. The act would delay new mercury rules for power plants and postpone the NOx and SO2 restrictions and trading market.  Ascend Analytics President Gary Dorris says the seesaw shifts make it difficult for executives to manage capital investments and shape portfolios for natural gas, coal and renewable energy.  Dorris says his company’s software allows users make as many plans for as many changes as they can foresee, and run each through an advanced simulation engine.

“If you don’t know what’s going to happen, you have to be ready for anything to happen,” Dorris says. “Our customers can build a plan and a portfolio for each scenario and then take it for a test ride.”

Whatever the environmental or economic merits, rolling out regulations and then rolling them back can have enormous impacts.  In the four days after the NOx and SO2 reductions were announced in July, broker trades for NOx emission allowances climbed from $150 per ton to $9500 – that spike occurring a full six months before the emissions market would even open. Such increases would make older coal plants lacking scrubber technology uneconomical.  If those rules don’t happen, the plants could remain profitable. Market uncertainty floats as a data point in every energy portfolio but political uncertainty of this magnitude remains difficult to quantify.  With Ascend Analytics software, energy portfolio planners test as many permutations of EPA rules as they wish to model.  Providing streaming market forward curves with CurveDeveloper, and risk-based decision analysis from PowerSimm, Ascend provides a comprehensive platform to model proposed regulations for integrated utilities, wholesalers, and retail providers.  PowerSimm applies detailed modeling and simulation of emissions, power, and fuel markets synched to generation, load, and hedge strategies to determine future costs and risk.  The model can then select an future supply portfolio optimized to changing regulatory and market risks and costs.  Armed with solid simulations and data, Ascend Analytic’s customers can plan with confidence for new EPA restrictions.  Whatever they turn out to be.