2019 ANNUAL REPORT HIGHLIGHTS WITH SELECT HIGHLIGHTS FROM WINTER 2020 QUARTERLY REPORT MAY 26, 2020 Helping our members work together to keep SPPorg southwest-power-pool SouthwestPowerPool 1 the lights on... today and in the future.
ANNUAL REPORT OVERVIEW MMU 2
MARKETS COMPETITIVE OVERALL • Low energy prices • Low frequency of offer mitigation • All frequently constrained areas removed MMU 3
MARKET DRIVERS • Factors influencing prices higher: • Increased generation outages • Factors influencing prices lower: • Lower gas prices • Increase in low-cost generation resources MMU 4
IMPORTANT ISSUES GOING FORWARD • Price formation during emergency and scarcity conditions • Incentives for resource adequacy capacity • Proper reporting of outages • Distortion of prices by self-committed generation • Under-scheduling of wind resources in day-ahead • Analyzing and addressing seams issues MMU 5
RECOMMENDATIONS – NEW • Improve price formation during • Emergency conditions • Scarcity events • Incentivize capacity performance • Update and improve outage coordination methodology MMU 6
RECOMMENDATIONS – EXISTING • Enhance market efficiency • Reduce need for self-commitment • Address under-scheduling of wind • Increase flexibility • Develop an uncertainty product • Enhance commitment logic • Continue development of energy storage design • Limit market power of changing parameters • Enhance credit rules for known information • Enhance ability to assess a range of transmission planning outcomes MMU 7
MARKET DRIVERS MMU 8
SPP GENERATION CAPACITY MIX Oil Solar Nuclear Hydro 2% 0% Other 2% 4% 0% Gas, combined cycle Coal 15% 26% Gas, simple Wind cycle 25% 26% MMU 9
LOAD DECREASED 0.5% IN 2019 COMPARED TO 2018 30 26 GWh (thousands) 22 18 14 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 2017 '18 '19 MMU 10
SPP PRICES, AND GAS COSTS, DECREASED IN 2019 $50 $5 $40 $4 $30 $3 $/MMBtu $/MWh $20 $2 $10 $1 $0 $0 2014 2015 2016 2017 2018 2019 Day-ahead price Real-time price Panhandle Eastern Pipeline gas cost MMU 11
WIND CAPACITY ADDITIONS CONTINUE TO OUTPACE RETIREMENTS 2,400 Nameplate capacity (MW) 1,800 1,200 600 0 2017 2018 2019 2017 2018 2019 retirements additions Coal Wind Hydro Gas Oil MMU 12
WIND CAPACITY AND GENERATION CONTINUED TO INCREASE 24 80,000 18 60,000 Generation (GWh) Capacity (GW) 12 40,000 6 20,000 0 0 2014 2015 2016 2017 2018 2019 Dispatchable capacity Non-dispatchable capacity Wind generation MMU 13
GENERATION OUTAGES – SPECIFICALLY GAS, SIMPLE-CYCLE OUTAGES – INCREASED 90,000 Outage (GWh) 60,000 30,000 0 2017 '18 '19 2017 '18 '19 2017 '18 '19 2017 '18 '19 Derate, Derate, Out-of-service, Out-of-service, forced maintenance forced maintenance Coal Gas, combined-cycle Gas, simple-cycle Hydro Nuclear Oil Other Renewable Wind MMU 14
SELF-COMMITTED START-UP INSTRUCTIONS DOWN 2017 2018 2019 Day-ahead market 68% 74% 75% Self-commitment 15% 11% 8% Intra-day RUC 8% 7% 7% Manual, regional reliability 4% 5% 7% Short-term RUC 2% 3% 2% Day-ahead RUC <1% <1% <1% Manual, local reliability 1% 1% 1% Starts 28,160 35,328 33,643 MMU 15
MARKET PERFORMANCE MMU 16
ALL-IN COSTS WERE DOWN 12 PERCENT AND WERE DRIVEN BY ENERGY COSTS $40 $4 Natural gas cost ($/mmBtu) $30 $3 All-in price ($/MWh) $20 $2 $10 $1 $0 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Energy (LMP) Reserves Day-ahead MWP Real-time MWP Gas PEPL MMU 17
FREQUENCY OF REAL-TIME NEGATIVE PRICES INCREASED IN ALL HOURS IN REAL-TIME 15% Percent negative price intervals 12% 9% 6% 3% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 LMP −$0.01 to −$25.00 LMP −$25.01 to −$50.00 LMP less than −$50.00 MMU 18
MARKET REVENUE INSUFFICIENT TO SUPPORT NEW GENERATION Annual Net Annual Able to Average Able to fixed revenue revenue recover marginal recover O&M cost Technology from SPP requireme new cost avoidable market nt ($/MW entry ($/MW ($/MWh) cost ($/MW yr.) yr.) cost yr.) Scrubbed coal $28.89 $18,170 $801,540 NO $83,750 NO Advanced gas/oil $24.43 $76,898 $110,007 NO $10,300 YES combined-cycle Advanced $41.69 $20,157 $93,783 NO $7,010 YES combustion turbine Wind -$30.00 $178,165 $252,355 NO $48,420 YES Solar $0.00 $69,196 $195,541 NO $22,460 YES MMU 19
WIND AND COAL GENERATION TRENDING IN OPPOSITE DIRECTIONS 70% 60% Percent of total generation 50% 40% 30% 20% 10% 0% 2014 2015 2016 2017 2018 2019 Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear MMU 20
WIND GENERATION OUTPACED COAL GENERATION IN APRIL AND OCTOBER 50% 40% Percent of total generation 30% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Coal Gas, simple cycle Gas, combined cycle Wind Hydro Nuclear MMU 21
VIRTUAL TRANSACTIONS CONTINUE TO GROW STEADILY 8,000 Average hourly volume (MW) 6,000 4,000 2,000 0 -2,000 -4,000 -6,000 -8,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Cleared bids < $30/MWh Cleared offers < $30/MWh Cleared bids > $30/MWh Cleared offers > $30/MWh Uncleared bids Uncleared offers Net cleared MMU 22
SPP EXPERIENCED FIRST CONSERVATIVE OPERATIONS SINCE START OF INTEGRATED MARKETPLACE • February 7 -9 (cold weather, icing impacts) • March 3-5 (cold weather, icing impacts, gas supply concerns) • May 29-June 1 (generation outages, low wind, increasing load) • June 4-7 (generation outages, low wind, summer load) • July 1-3 (generation outages, low wind, summer load) • July 10-17 (generation outages, high load) • August 6-8 (generation outages, high load, low wind, EEA 1) • August 12-13 (high load, low wind, hot weather) • August 20-21 (high load, hot weather) • September 5-7 (generation outages, high load, low wind) MMU 23
PRICES DURING EEA 1 DID NOT REFLECT EMERGENCY CONDITIONS $1,500 Marginal energy component ($/MWh) $1,200 EEA1 Conservative operations $900 $600 $300 $0 10:00 11:00 12:00 13:00 14:00 14:30 15:00 15:30 16:00 17:00 18:00 19:00 20:00 8:00 9:00 Marginal energy component MMU 24
CONGESTION MMU 25
CONGESTION HAS SHIFTED TO THE SOUTHEAST MMU 26
FREQUENTLY CONSTRAINED AREAS CHANGING AS CONGESTION SHIFTS Central Kansas Southwest Missouri 2018 study addition 2018 study addition 2019 study removal 2019 study removal Day-ahead marginal congestion component MMU 27
MARKET-TO-MARKET PAYMENTS INCREASED $8 $35 $6 $28 $4 $21 $2 $14 Millions Millions $0 $7 -$2 $0 -$4 -$7 -$6 -$14 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Total Payments from MISO to SPP Payments from SPP to MISO Net payments MMU 28
TRANSMISSION CONGESTION AND AUCTION REVENUE RIGHT FUNDING $800 100% $500 200% TCR funding ARR funding $600 80% $400 160% Funding percent Funding percent Millions Millions $400 60% $300 120% $200 40% $200 80% $0 20% $100 40% -$200 0% $0 0% 2017 2018 2019 2017 2018 2019 Day-ahead revenue Transmission congestion right revenue Transmission congestion right funding Auction revenue right funding Surplus/shortfall Surplus/shortfall Funding percent Funding percent MMU 29
MARKET EFFICIENCY MMU 30
DAY-AHEAD MAKE-WHOLE PAYMENTS INCREASED BY 16 PERCENT $8 $40 $6 $30 Millions Millions $4 $20 $10 $2 $0 $0 2017 '18 '19 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other MMU 31
REAL-TIME MAKE-WHOLE PAYMENTS INCREASED BY ALMOST 55 PERCENT $10 $75 $8 $60 Millions Millions $6 $45 $4 $30 $2 $15 $0 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Total Coal Gas, combined-cycle Gas, simple-cycle Hydro Wind Other MMU 32
SCARCITY EVENTS INCREASED IN 2019 200 $1,000 Marginal energy cost ($/MWh) 150 $750 Scarcity intervals 100 $500 50 $250 0 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 Operating reserve scarcity Regulation-down scarcity Regulation-up scarcity Operating reserve scarcity price Regulation-down scarcity price Regulation-up scarcity price MMU 33
REAL-TIME PRICE VOLATILITY UP, BUT DAY-AHEAD VOLATILITY DOWN 80 Volatility (standard deviation) 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 '18 '19 real-time volatility day-ahead volatility MMU 34
WIND NOT IN DAY-AHEAD MARKET DRIVING PRICE DIVERGENCE 2,400 Import increase 2,000 Self-committed after day-ahead market 1,600 RUC/manual Net additional committed real-time supply MWh 1,200 800 Wind 400 Net virtual supply (day-ahead) 0 Additional energy Reductions MMU 35
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