(September 2010) During July ComEd brought $500 million worth of 10-year notes to market; Massey Energy acquired Marmet Dock from Kanawha River Terminals; Beacon Power raised $25 million in...
standard deviation estimate of 20.4.
A 20-percent increase in prices would have a dramatic impact on revenues. Consider unit 8 at the Joliet 29 plant in Will County, for example. The coal-fired steam turbine has a summer capacity of approximately 518 MW. From 2000 through 2003, this unit had an average capacity factor of 76.8 percent during on-peak hours. A 518-MW base-load unit generating at 76.8 percent capacity for the summer on-peak hours would realize approximately $16.5 million in revenues during the on-peak period but would realize over $20.1 million based on our hotter weather scenario if the capacity factor remained unchanged.
Similarly, consider a peaking unit such as Elgin Energy Center CT03. This gas turbine unit has a summer capacity of 117 MW and a marginal cost of approximately $68/ MWh. Based on the average prices in Table 2, it would be profitable to operate this unit any time the temperature was greater than 85 degrees. A 117-MW peaking unit that usually generates in the on-peak period any time the temperature is above 85 degrees would have operated for 19 hours in 2004 and approximately 209 hours in a hotter summer like 2002. Assuming average prices by temperature band in 2004 and an 80-percent capacity factor when running, this same unit would realize just over $100,000 in energy revenues in 2004, compared with about $1.3 million in a summer like 2002.
ComEd's new LMP market is supposed to use prices to highlight significant load pockets and transmission congestion points. Looking at the past summer it appears that there isn't much congestion in ComEd right now. Of course, neither the grid nor the generating capacities of the region were challenged by the weather of 2004. For the most part, the market provided no clear incentive to either site generation in a particular location, or to invest in a particular transmission infrastructure. Generators in Rockford were the best off, with an average $2 on-peak location premium over the entire summer. The best opportunities to make money in the ComEd region were at the export interfaces, indicating that to fetch the highest prices, generators would be best off to locate in another market altogether.
A warmer year, or even a typical year, likely would result in higher overall energy prices. Our simple analysis estimated a 20-percent increase from a summer like 2004 to a summer like 2002, assuming a linear relationship between CDD and market price. It is likely that the relationship between weather and market price is nonlinear and would result in even higher prices.
During a cool summer like 2004, a transmission trader would find ComEd boring. But ComEd is likely well prepared for hotter summers to come. In addition, ComEd appears to be a good market for generators who lack the ability to analyze more lively transmission markets like those in PJM proper. However, independent generators in the region may want to find a deal on firm transportation to New York if they want to make a buck during a summer like 2004.
Articles found on this page are available