The province’s major energy utility, needed to implement a market simulation software system to help maintain its position as the lowest-cost provider of domestic electricity rates in Canada while managing the start of the MISO Day-2 Market. Using PROMOD IV from ABB, the utility has successfully entered and kept pace in the MISO market and realized significant ROI.
Manitoba Hydro is a Crown Corporation and the province’s major energy utility, headquartered in Winnipeg, Manitoba. Manitoba Hydro exports electricity to more than 30 electric utilities through participation in four wholesale markets in Canada and the Midwestern United States. They maintain a position of being the lowest-cost provider of domestic electricity rates in Canada, serving 516,800 electric customers throughout Manitoba and 259,500 gas customers in various communities throughout southern Manitoba. Manitoba generates self-renewing water power from 14 hydroelectric generating stations, primarily on the Winnipeg, Saskatchewan, and Nelson rivers, and is a major distributor of natural gas, delivering to nearly 100 communities in the province. They have capital assets-in-service at original cost exceeding $11 billion, making them one of the largest energy utilities in Canada.
In 2004, Manitoba Hydro had a number of reasons it needed to implement a market simulation software system. First, as a hydro-dominated utility following an energy constrained dispatch model, there were many challenges around understanding the optimization of plant dispatch within a broader thermal system. Second, Manitoba Hydro was preparing for a major change in its marketplace – the start of the Midwest Independent System Operator (MISO) Day-2 Market.
With the launch of the MISO Day-2 market in 2005 came new market components, including the introduction of LMPs and FTRs. A comprehensive power market modelling solution was necessary to provide greater insight into the new dynamic market conditions including transmission expansion, transmission congestion, LMPs, and optimal plant dispatch.
Manitoba's selection committee compared various systems, selecting PROMOD IV for its superior unit commitment and dispatch algorithm and its established use by a large number of utilities across North America, particularly in the MISO market.
Manitoba Hydro has utilized PROMOD IV in various capacities since the opening of the MISO market. While the system is run by one to two full-time employees, the data and analyses are shared across the organization, from the energy marketing group to those responsible for exploring hydro-generation development and new transmission lines.
PROMOD IV is primarily leveraged for:
- Modelling market conditions over a year-long horizon, or up to 15 months in certain instances
- FTR portfolio evaluation and auction analysis
- What-if scenarios (e.g., if another utility builds new generation or transmission in a region, how does this affect market prices)
Examples of scenarios that Manitoba Hydro models include:
- Evaluating MISO hourly prices and congestion, as a benchmark and predictor of future congestion
- Assessing the effects of significant additional wind power on market prices
- Modelling changes in water and weather conditions to assess the direct impact on generation and the overall market
- Examining implications of higher load patterns
- Determining how changes in natural gas prices drive dispatch patterns and market prices
- Greenhouse gas (carbon) emission modeling, including modeling the effect of changes in operating rules
A PROMOD IV strength is its ability to capture all the costs of operating a generation fleet. PROMOD IV calculates hourly production costs and location-specific market-clearing prices, enabling utilities like Manitoba Hydro to optimize their interaction with the market while simultaneously adhering to a wide variety of operating constraints. Used in conjunction with analysis of the historical variance of key market drivers, and of postulated impacts of new market drivers, PROMOD IV can generate various scenarios to give a range of expectations. "One of PROMOD IV's greatest strengths is its ability to isolate variables and create base cases for comparison," said Kelly Hunter, Manitoba Hydro's Market Access Officer. In addition, Manitoba Hydro utilizes ABB enterprise software’s forward price forecast, Market Advisor, as a future long-term price benchmark for conducting economic valuations of the 5,000 MW of still undeveloped hydro within Manitoba.
The first successful application of PROMOD IV involved analysis of changes in FTR values based on potential changes in future hydro generation. Manitoba Hydro was able to predict how such changes in generation would affect congestion patterns in the marketplace and use this information to help plan its hedges for congestion costs. Another application was modelling Arrowhead-Weston, a 220-mile transmission line connecting Duluth, Minnesota and Wausau, Wisconsin, which went into service in January 2008.
Over the course of three-plus years, PROMOD IV has provided Manitoba Hydro with critical information for decision analysis. In summary, Manitoba Hydro has:
- Successfully entered and kept pace in the MISO market. While Manitoba Hydro sells wholesale power into the IESO and AESO markets, the majority of its volume (approximately 80 percent) is sold into the MISO Day-2 Market, which supports 15 Midwestern states in addition to the Province of Manitoba.
- Realized significant ROI from FTRs via deeper analysis of congestion costs in the day-ahead market.
- Used the knowledge gained from using PROMOD IV to glean further insight into other external studies using PROMOD IV, such as:
- Minnesota Wind Integration Study, which evaluated the impacts on reliability and costs associated with increasing wind capacity to 15 percent, 20 percent, and 25 percent by 2020
- 2005, '06, & '07 Midwest Transmission Expansion Plan (MTEP), which identified hundreds of planned or proposed transmission facility additions or enhancements
- Loss of Load Expectation (LOLE) MISO Working Group, using PROMOD IV to determine zones for resource adequacy