Online Readings

The spark spread is the price difference in equivalent units between the market price of
electricity and the market price of fuel
A positive spark spread would indicate that it is more economical to burn the relevant fuel to
generate electricity than to purchase power from the grid. A negative spark spread would
indicate that it is more economical to sell the gas in the spot market and purchase the electricity
from the grid.

Check the example on pg 4/5

Other factors infl uence the economics of PV electricity (see Chapter 5), with a key one being the
installed price per peak watt ($/Wp), which includes the cost of the PV module as well as socalled balance-of-system (BOS) costs. BOS costs include the cost of the inverter and other
hardware, along with all other expenses involved in customer acquisition, physical installation,
regulatory compliance, and grid connection.
Residential: Systems up to 10 kilowatts (kW)
Commercial: Systems ranging between 10 kW
and 1 megawatt (MW)
Utility: Systems larger than 1 MW

By mid-2014, the price for residential inverters

in the United States was in the $0.28/W p
$0.31/Wp range, approximately 50% below
typical prices in 2009.5,6,7

Balance-of-system costs are a much higher fraction of total installed system cost for
residential PV compared to utility-scale plants
bottom-up estimate of cost for utilityscale PV installations yields a result that is very
close to the average reported price per peak watt, indicating active competition in
that segment of the PV market. In the residential sector, by contrast, a large diff
erence exists between contemporary reported prices and estimated costs
The investment tax credit (ITC) has been the
most important federal-level mechanism for
subsidizing solar energy deployment since it
was enacted in 2005. Owners of solar facilities,
both commercial and personal, can claim a
federal tax credit of 30% of a facilitys eligible
cost basis.

The cost method is the most straightforward

method for estimating FMV. It is based on
the assumption that an informed purchaser
will pay no more for a system than the cost
of replacing it.
The market method relies on data from
recent sales of comparable systems to
estimate FMV.
The income method estimates FMV based
on the cash flows generated by the system.
FMV _ PVLease_PVSubsidy
FMV _PVLease_0.38_CBITC

Greater installer experience and effi ciency

have contributed to lower residential PV
prices in Germany compared to the United
States, but part of the diff erence is also
attributable to diff erences in government
and regulatory structure, and to diff erences
in the structure of the housing stock

The current German average system cost of

approximately $2.05/Wp likely represents the lower
limit of what can be achieved through further cost
reductions in the U.S. residential PV market
With a large penetration of solar PV,
incremental PV does not signifi cantly
reduce the annual net peak load of the
power system. Indeed, in regions where
electricity demand peaks after sunset,
adding PV generation without storage
does not reduce annual peak load at all.
large penetration of solar PV displaces
the plants with the most expensive variable
costs and increases thermal plants cycling
requirements.
Nuclear plants have the lowest variable cost
of all thermal generation technologies and are
often assumed to be totally infl exible from an
operational standpoint.x Therefore, they are run
as purely base-load plants
The larger the solar PV presence, the larger
the systems operating reserve requirements,
leaving less fl exible plants to meet system
demand.xi This reduces overall system
fl exibility.9

After solar reaches a certain penetration level,

the average cost of each MWh produced with
conventional technologies increases because of
higher cycling costs.
Peak price increases with higher levels of solar
PV penetration
Even if solar PV generation becomes cost
competitive at low levels of penetration,
revenues per kW of installed capacity will
decline as solar penetration increases
until a breakeven point is reached, beyond
which further investment in solar PV
would be unprofi table

Positive synergies can be achieved by

jointly coordinating hydro and solar
production in ways that help reduce net
peak loads and cycling requirements
for thermal generators
Hydro production increases the capacity
value of solar generators at low levels of
PV penetration
Despite a decline in average wholesale
prices due to high solar PV penetration,
it remains profi table over the long term
to invest in thermal plants (mainly CCGT
and CGT).
At high levels of solar PV penetration,
production subsidies lead to short-term
ineffi ciencies in system operation and
changes in the generation mix
CSP plants to allow for energy storage typically
lowers short-term generation costs by permitting
more effi cient operations and by enabling
continued power output after sunset
At high levels of solar PV penetration, the
addition of energy storage facilities benefi ts
solar PV owners by increasing wholesale
prices during load valleys and thereby
increasing the market remuneration PV
owners receive for electricity delivered
during these periods.
The roundtrip effi ciency for producing
electricity from these storage facilities is
assumed to be 0.7.xxii

Except for very low levels of PV penetration,

the larger the quantity of added energy storage
capability, the higher the revenues generated
by PV plants and therefore the higher the
profi tability of PV investments at any level
Dynamic Line Rating
(DLR) completed in 2013.48 DLR dynamically increases transfer limits relative both to the
static
ratings typically used in utility operations and to ambient-adjusted (AAR) line ratings based
on
ambient conditions of the physical transmission line, such as temperature, wind, and
humidity,
or based on the direct measurement of line sag. Lower temperature and higher wind help
cool

the physical wires and therefore allow higher transfers of power without sagging as much
from
the heat produced by current flow. 49 Two important potential application of DLR are for
congestion mitigation and planning. Oncor, in its evaluation of the DLR pilot, notes that
Study
results show that congestion mitigation can be obtained with as little as a 5 to 10% increase
in
capacity over the currently used ambient-adjusted line ratings.

Chapter 3: Markets for Electrical Energy

bilateral trading involves only two parties: a buyer and a seller

The market clearing price represents the price of one additional megawatt-hour of energy and is
therefore called the system marginal price or SMP. Generators are paid this SMP for every
megawatt-hour that they produce, whereas consumers pay the SMP for every megawatt-hour
that they consume, irrespective of the bids and offers that they submitted.

ltpraodsteprosnperetfheriradterutaeilsepdotanmaalyrksiestuthnatitliCshdaripvtenr5so.lelybymark
etforcestoa managed spot market that is heavily influenced by complex technical considerations

The difference between coffee and electrical energy is that coffee traded in the spot market is
produced exactly the same way as coffee sold under a long-term contract. On the other hand, an
MWh sold through the managed spot market Markets for Electrical Energy often will have been
produced by a plant that is much more flexible than the plants that generate the bulk of the
energy consumed at that time.

Chapter 4: Participating in Markets for Electrical Energy (Sections 4 to 4.3.1.14 only)

(VOLL), which is obtained through surveys of consumers and represents the average price per
megawatt-hour that consumers would be willing to pay to avoid being disconnected without
notice.

The first type of quasi-fixed cost is the no-load cost. If it is possible for the unit to remain
connected to the system while supplying no electrical power, the no-load cost represents the
cost of the fuel required to keep the unit running.

Diesel generators and gas turbines have low start up costs as they start quickly.
Large thermal units require considerable amount of heat energy before the steam is at a
temperature and pressure that are sufficient to sustain the generation of electric power. These
units therefore have a large start-up cost.

Chapter 6: Transmission

Since these transactions are bilateral, the agreed prices are a private matter between the buyer
and the seller. On the other hand, the amount of power to be transmitted must be reported to
the system operator because this power flows on the transmission system that is open to all
parties. The system operator must check that the system will remain secure when all these
transactions are implemented.

Transmission rights of this type are called physical transmission rights because they are intended
to support the actual transmission of a certain amount of power over a given transmission link

RTOTAL = B PB +S PS = B (DB +FBS)+S (DS FBS)

ETOTAL RTOTAL = (S B) FBS
This difference between payments and revenues is called the merchandizing surplus. It is thus
equal to the product of the differences between the prices in the two markets and the flow on the
interconnection between these two markets. In this case, since this surplus is due to the
congestion in the network, it is also called the congestion surplus.

Variable losses are also called load losses, series losses, copper losses or transport-related
losses.
Averaged over a whole year, in western European countries, 1 to 3% of the energy produced is
lost in the transmission system and 4 to 9% in the distribution system.
The second type of losses is the fixed losses. Most of these losses are caused by hysteresis and
eddy current losses in the iron core of the transformers. The rest is due to the corona effect in
transmission lines.

Bill concludes that problems with contracts for differences can be solved if the parties acquired
what is called Financial Transmission Rights (FTRs). FTRs are defined between any two nodes in
the network and entitle their holders to a revenue equal to the product of the amount of
transmission rights bought and the price differential between the two nodes. Formally, the holder
of FTRs for F MWh between locations B and S is entitled to the following amount taken from the
congestion surplus:
RFTR =F(S B)

Instead of being defined from point to point, FTRs can be attached to a branch or flowgate in the
network. They are then called flowgate rights (FGRs). FGRs operate like FTRs except that the
value of these rights is not tied to the difference in nodal prices, but to the value of the Lagrange
multiplier or shadow cost associated with the maximum capacity of the flowgate. When a
flowgate is not operating at its maximum capacity, the corresponding inequality constraint is not
binding, and the corresponding Lagrange multiplier has a value of zero. The only FGRs that
produce revenues are thus those that are associated with congested branches.

Chapter 7: Investing in Generation

how many hours each year the load is less than a given value. This information is encapsulated
in what is called a load-duration curve.

Production [MWh] bid [$/MWh] = fixed cost [$] + production [MWh] heat rate [Btu/kWh]
fuel cost [$/MBtu]

The centrally determined price of electrical energy during each period t was increased by a
capacity element equal to
CEt =VOLLLOLPt (7.1)
where VOLL is the value of lost load (determined through a customer survey and updated
annually to take inflation into account) and LOLPt is the loss of load prob- ability during period t.

A shorter time step also increases the liquidity of the capacity market. On the other hand, a
longer time step (e.g. a season or a year) favors generators and encourages the building of new
capacity. In an interconnected system, it discourages existing generators from selling their
capacity in a neighboring market. A longer time step also matches more closely the period over
which the regulatory authorities evaluate the reliability of the system.

Chapter 22: Analytical Tools

Some of the available packages include:

Cambridge Energy Solutionss (CES) Day Ahead Analyzer (Dayzer) and Transmission Analyzer
(Tranzer)
GE-MAPS
PROMOD IV
Power World
AURORAxmp.

The capacity factor is defined as the actual output of energy over a certain period of time divided
by the potential output if the unit is operated at full nameplate capacity 24 hours a day.
Quarterly capacity factor = Energy produced during the quarter / [Quarterly capacity 2190]
Annual capacity factor = Energy produced during the year / [Quarter 4 capacity 4 2190]

2,190 used in the definition of the capacity factor corre- sponds to the average quarter length of
91.25 days.

The availability factor of a power plant is the fraction of time it is available to produce electricity.
Solar panels and wind turbines may have, by frequently used convention, availability factors
approach 100%, but the capacity factors may be of an order of magnitude of 1520%.
Load factor measures how steady electricity generation (consumption) is. It is defined as the
ratio of the average load supplied during designated time to the peak load.
Demand factor is the ratio of maximum demand divided by the total load connected to the
system.

The energy efficiency of a thermal generation unit is expressed in terms of percentage of

theoretical maximum level of energy that can be produced, or in terms of the heat rate.
Thermal efficiency
= Electricity produced / Energy input
thermal plants, this ratio varies typically between 30 and 50%, with combined cycle plants
reaching 60%.

hydro power station with 85% efficiency, a coal-fired thermal power plant with 45% efficiency, or
a solar power plant with 15% efficiency.

Lower heat value LHV = HHV 10.55(W + 9H)

HHV is the higher heating value of fuel in Btu/lb, W is the weight % of moisture in fuel and H is
the weight % of hydrogen in fuel.

Technological heat rate is energy input (ie, energy contained in fuel) required to produce one
kWh (or one MWh) of electricity in a given generation unit. The heat rate is defined as the Btu
input per 1 kWh of electricity produced (or MMBtu per one MWh).

A heat of 6,300 Btus means that a plant burns 6,300 Btu of natural gas to produce 1 kWh of
electricity. If we use different units, this is equivalent to 6.3 MMBtus per 1 MWh of electricity. At
prices of natural gas of around US$2.5/MWh, this translates into a marginal cost of US$15.75/
MWh
the heat rate is higher during the ramp-up period or when a power plant shuts down. This is an
important considera- tion for decisions related to unit dispatch.

The term market heat rate denotes the ratio of electricity price to the fuel price. For example, if
the forward price of electricity is equal to US$36/MWh, and the price of natural gas is equal to
US$4/MMBtu, the implied market heat rate is equal to nine.

Thermal efficiency (heat rates) are affected by a number of different factors.

Design choices. For example, higher turbine pressure and temper- ature increase efficiency but
require more expensive materials.
Operations procedures.
Fuel quality. There are many trade-offs between coal quality (for example, ash and sulphur
content) and energy content. Pollution abatement. Emission controls and CO2 sequestration (ie,
capture in underground rock formations) is a good social policy but it has to be paid for.
Ambient conditions. Heat rates of thermal power plants are lower (ie, efficiency is higher) in
winter. Air used for combustion is denser (burning processes are more efficient) and steam
(gases) exiting a turbine decompress more effectively if the ambient temperature is lower. Also,
plants located at lower altitudes are more efficient, everything else being equal.

Fuel prices are multiplied by the heat rate to convert them to the same units in which electricity
is priced.
the underlying assumption is that a genera- tion unit can be looked at as a portfolio of options to
generate electricity or standby, depending on the market conditions. The payout of this option is
defined using a spark spread, which is effec- tively a profit margin from producing power, if one
ignores the fixed costs (depreciation, taxes, interest on debt, etc). The strike of this option is
equal to the variable non-fuel unit cost, which is some- times ignored in the analysis.
Spark spread = Power price Heat rate Fuel price

Dark spread is the spread between electricity prices and the prices of thermal coal burnt at the
plant. Quark spread is the spread calculated for nuclear power plants.
The clean spark spread (otherwise known as a green spark spread) represents the profit margin
of a generator who sells power produced in a gas-fired power plant, after buying carbon credits
corresponding to the volume of CO2 emissions.

The CO2 intensity factor is assumed by conven- tion to be equal to 0.411 tons of CO2 per MWh
for gas plants, and 0.86 for coal plants. The efficiency levels of a typical gas-fired power plant are
assumed in most publications to be between 0.5 and 0.55, and between 0.38 and 0.4 for coal
plants.

Climate spread is defined as the difference between clean dark spread and clean spark spread.
This spread captures the climate benefits of using natural gas as a fuel instead of coal.

In the case of natural gas power plants, one has to recognise limi- tations related to the
following.
Number of starts. A number of starts per year exceeding a certain level (typically, around 50)
results in the excessive wear and tear of the turbine and increases maintenance and servicing
costs.
Ramp-up and ramp-down costs. Depending on the initial condi- tions (warm or cold start), it takes
time to bring the unit to full capacity or to shut it down.
Minimum up- and downtime. After it is shut down, a unit may have to remain idle for a period of
time dependent on the turbine design. This is related, among other factors, to the requirement to
cool down (warm up) different components at an optimal rate to avoid thermal stress.
Limitations on the total number of hours of operation. National and local environmental laws
translate into either limitations on the total numbers the units can run in a given period of time
and/or the need to purchase emission credits (CO2, SO2, etc)

Complications that are usually ignored include:

access to fuel supply at short notice due to technological factors;

an ability to coordinate dispatch decisions with the fuel suppliers;

the potential for fuel suppliers to extract value from a power plant.

High-point loads. The off-takes of power plants per unit of time are large relative to those of other
customers. For example, a 500 MW unit with an 8 MMBtu/MWh technological heat rate will
require 4,000 MMBtus of natural gas per hour, sometimes at a moments notice.
High-pressure loads. Modern gas turbines require delivery pres- sures of 450 to 475 psi at the
fuel skid.
For example, a modern combustion turbine unit of 500 MW can exhaust the line pack of a 36
line operating at 800 psi pressure in about four hours.

pipeline operations evolve around the gas day, which is defined as a 24-hour period starting at
9:00 am CPT. The electric day is from midnight until midnight. This means that not only
communications between the operators of the two systems are difficult, but it is also problematic
to synchronise the decision-making process.

In practice, the generation stack is used in conjunction with a load forecast. Market prices are set
by the least efficient unit required to satisfy anticipated load. The stack is a very popular tool
among energy traders, and the construction and daily updates of a stack are two of the main
responsibilities of any fundamental analysis group.

Form EIA-923, Power Plant Operations Report, is used to collect information on:
receipts and costs of fossil fuel; fuels stocks; generation; consumption of fuel for generation; and
environmental data.

Emissions = Quantity of fuel consumed Emission factor Sulphur content

The emission factor depends not only on the type of fuel, but also on the combustion system and
firing configuration (for example, cyclone boiler versus fluidised bed boiler).
Many plants use different flue gas desulphurisation (FGD) equip- ment and low-NOx burners, and
selective catalytic reduction (SCR) systems for reducing SO2 and NOx output

CEMS is a real treasure trove of information that the industry does not use to its full potential.
The data is collected under Title IV of Clean Air Act Amendments of 1990 (CAAA), which requires
electric utilities to monitor and report hourly NOx, SO2 and CO2 emissions and heat input to the
EPA.
CEMS data can be downloaded from: ftp://ftp.epa.gov/dmdnload/emis- sions/hourly/monthly/

Form EIA-860 is used to collect data on the status of existing electric generating plants and
associated equipment (including generators, boilers, cooling systems and FGD systems) in the
US, and those scheduled for initial commercial operation within five years of the filing of this
form.

Form EIA-861 is used to collect information related to peak load, generation, electric purchases,
sales, revenues, customer counts and demand-side management programmes, green pricing and
net metering programmes, and distributed generation capacity.
File 1. Aggregate operational data such as energy balance and revenue information
File 2. Retail revenue, sales, and customer counts, by State and class of service,
File 3. Electric utility demand-side management programmes, including energy efficiency
File 4. The names of the counties, by state, in which the respon- dent has equipment for the
distribution
File 5. Aggregate data of the number of customers by state and customer class for green pricing
File 6. Utility or customer-owned distributed generation capacity such as the number, capacity
and types of generators

Regression equations generate forward prices for 42 hubs from the forward curves derived from
market observations, relying on rela- tionships between spot prices and lagged forward prices:
Ftod (T)=a+bStod +cFyest (T)+...
where Ftod (T) is forward price as of time tod (today) with maturity equal to T ; Fyest (T ) is
lagged forward price, Stod is a spot price as of today.

The electricity prices used by Platts are prices for next-day delivery (Monday prices in the case of
Friday-dated transactions), published for each relevant market hub in Platts Energy Trader.
Natural gas prices are the next-day spot prices for the most active trading point critical to a
given electricity market and published in Energy Trader.
service offered by Genscape, which relies on remote sensors distributed around the country and
monitoring electromagnetic fields around the power transmission lines. The primary objective is
to infer from these data the condition of the generating units and, especially, unscheduled
outages resulting in sudden changes of power flows, as the inte- grated transmission/generation
system adjusts to the shock.

Oil prices are represented by spot cargoes for 1% sulphur residual HP (High Performance) at New
York port for the East region and 0.7% sulphur residual fuel oil at Gulf Coast ports for the Central
region.

Analysis of the hydro systems evolves around two critical issues:

J how much water will be available in the reservoirs for power generation or what will be the river
flows; and
J how hydro power plants will be operated, given the water availability.

A spark spread calculator is available at http://www.cmegroup.com/toolsinformation/calc_spark.html

http://www.eia.doe.gov/cneaf/electricity/forms/eia860.pdf

http://www.genscape.com/pages.php?uid=2

http://www.nwrfc.noaa.gov/river/river_summary.php?sort=s1&ss=name&ss=COLUMBIA

Chapter 23: Energy Market Transactions

Area Control Error (ACE), given by:

ACE=(NIA NIS)10b(FA Fs)IME

where NIA stands for the net interchange actual, NIS stands for the net interchange scheduled, b
is frequency bias (<0), FA is frequency actual, FS is frequency scheduled and IME stands for
meter error. NERC formulated two criteria for ACE: A1 and A2. Under A1, ACE must return to zero
within 10 minutes of the previous zero. Under A2, averaged ACE for each 10-minute period must
be within limits.

Reactive power provides the support to the electromagnetic fields that transport alternating
current through the transmission and distribution grids.
Reactive power can be produced as either static or dynamic. Dynamic reactive power is
produced by generators, whereas static reactive power comes from capacitors.
A generator consists of a stationary part, called an armature, and a moving part called a field or
a rotor. Both parts have slots through which coils of wire are pulled. The rotor is an
electromagnet (a natural magnet would not create a magnetic field strong enough for any
practical applica- tions), with the power source called an exciter
The generators can both supply and consume reactive power, depending on their mode of
operation. The generators supplying reactive power have a lagging power factor and operate in
the overexcited mode. In the under-excited mode, a generator has a leading power factor

Under the traditional vertically integrated utility model, capacity expansion was handled through
the regulatory process and adjust- ments to tariff rates. Utilities were obligated to carry out
periodic assessments of expected demand and required investments in gener- ation and
transmission capacity

Firm transmission rights (FTRs) are financial instruments with payouts based on the difference
between two locational prices: the price at the sink and at the source (at the injection node). The
payout for an FTR is FTR MW (Locational marginal price (sink) Locational marginal price (injection))

In a power pool with n nodes, there are potentially n2n point-to-point transmission lines. One
has to remember, however, that only n1 FTR contracts are indepen- dent ie, cannot be
reconstructed as combinations of other contracts.

The high- lights of PJM FTRs include:

FTRs are based on day-ahead prices; adjusted for marginal line losses (since June 1, 2007);
available for any pricing node in the system, including hubs, control zones, aggregates,
generator buses, load buses and inter- face pricing points; may be bought or sold or selfscheduled; available as 24-hour, on-peak, off-peak financial products; options are available for all
the three product classes listed above; calculated hourly; available at denominations to the
nearest 0.1 MW.

Tolling transactions may be either physical (ie, involve a physical assets, which is managed with
respect to its dispatch by the holder of a tolling contract) or financial (virtual). For the latter, a
transaction settles in cash, based on the market prices of natural gas and elec- tricity and a
formula agreed in the contract. A buyer of a tolling contract goes long the price spread between
electricity and fuel prices. In the case of a financial tolling transaction, their exposure is limited to
two agreed price indexes (for power and fuel) and the heat rate specified in the contract.
Suppose the agreed heat rate is equal to 8 MMBtu/MWh, with the price indexes being the Gas
Daily Houston Ship Channel next day natural gas price and the Megawatt Daily next day on-peak
electricity price in the Houston zone. If the price of natural gas is equal to US$4.00/MMBtu, the

implied price of electricity is equal US$32/MWh (given a heat rate of 8). If the Megawatt Daily
electricity price prints at US$35/MWh, the buyer of this tolling contract receives US$3/MWh
multiplied by the number of megawatts specified in the contract.
Phase angle is a quantity that indicates the difference in time of peaks of sinusoid waveforms.
Power factor is a measure of real power in relation to reactive power; mathematically, it is
defined as the cosine of the phase angle between voltage and current. When the power factor is
leading, the current phase angle is greater than the voltage phase angle; when the power factor
is lagging, the current phase angle is smaller than the voltage phase angle. Capacitors supply
reactive power and have leading power factors, while inductors consume reactive power and
have lagging power factors.

Capacity Markets Lessons Learned from the First Decade

Energy-only markets are also susceptible to potentially very large year-to-year variations in the
realized reserve margin, due to investment cycles and supply and demand uncertainties.

The primary difference between a purely bilateral construct as in California and a centralized
construct as in NYISO is the introduction of a centralized, mandatory auction for capacity. Under
both options, LSEs are subject to a resource adequacy requirement that compels them to procure
capacity sufficient to meet anticipated peak load plus a planning reserve margin. If LSEs have
not yet met their capacity obligations by a certain deadline, RTOs with centralized capacity
markets will procure the deficiency amount on their behalf. In MISO, which largely consists of
cost-of-service regulated utilities, the vast majority of all capacity is procured by LSEs prior to the
centralized capacity auction.

Net CONE represents the long-run marginal cost of supplying capacity at the target reserve
margin.

Chapter 6: Wind Farms: Developing and Operating Wind Power Plants

Individual turbines are connected by medium-voltage power lines (34.5- kV) and other electrical
and communications equipment, called a collection system. Large wind farms usually have at
least one utility substation, which steps up the turbines power to a higher voltage for longdistance transmission.
From the wind farm developers perspective, proximity to transmission lines is a high priority in
selecting a site, second only to the wind resource itself.
Sometimes, wind farms that are connected to the grid can be curtailedforced to reduce their
output or shut down temporarilywhen the amount of wind power being generated exceeds the
available transmission capacity.
A big wind farm might have more than 10 suppliers and service providers and more than 20
supply and service contracts.And much of the equipment comes from places all over the world.

U.S. projects averaged 76 MW in 2010, while average sizes on land have traditionally been
smaller in Europe.
ideal, developers of large wind farms look for strong, steady winds of at least 67 m/s (1316
mph), preferably blowing much of the time at 1214 m/s (2731 mph), the region where big
turbines generate their maximum output.
The first place to start is a factor called power density (measured inW/m2), which indicates how
much potential wind energy is available over a given area of land for a turbine to convert to
power.
many wind turbines are installed along ridgelines in areas with canyons, hills, or mountains. The
wind accelerates along the ridgeline, boosting the amount of energy that can be captured.

Met towers installed during the assessment phase are sometimes left in place when the wind
farm starts operating. They can continue to provide valuable information on how the turbines are
performing, given how much wind energy is available.
developers are using sodar and lidar technologies to assess the wind resource more accurately
and comprehensively. These systems generate more data on wind characteristics than met
towers alone can

Wind turbines are designed to a classa specific set of wind speeds and turbulence (table 63),
as defined by the International Electrotechnical Commission. The turbines design certification
verifies that the machine will perform as specified over a 20-year lifeif its operated in
conditions corresponding to its turbine design class.

An important factor in turbine selection besides the power curve, which shows how much power
the rotor produces at different wind speeds, is the machines projected availability, defined as
the percentage of time that a wind turbine is running or is ready to run.
. Wind farm design is always a compromise between energy output, accessibility, ease of
permitting, and financial practicality.

The balance of plant is the turbines support system and equipment such as the foundation and
the electrical connections

capacity factor, a measure of productivity. This is a percentage defined as the actual amount of
energy produced by a wind turbine or farm over a given period of time divided by how much
energy it should have produced during that time if running at maximum output
capacity factor = MWh produced / (rated MW hours)

a wind turbines capacity factor is a matter of economical design. A turbine with very long blades
and a small generator would run at full capacity whenever the wind blows and could achieve
capacity factors of 60%80%but it would produce very little electricity, being limited by
generator size in relation to rotor size. To maximize return on investment, wind farm operators
use a larger generator to produce more electricity at a lower capacity facto

Power prices vary by time of day, increasing the complexity of projecting wind farm revenues
In calculating the net cost of power generated, developers commonly levelize expenses and
incomes over the life of the turbines and the wind farm. This means taking an expense or income
that occurs in a particular year and spreading it over the total years of the project life

All of the wind farms electrical equipment must be compatible with the transmission systems
requirements, or grid codes, as theyre called in Europe.

In todays wind farms, turbines with power electronics are able to support the grid when it needs
generating capacity to maintain voltage. This is called low-voltage ride-through.
dynamic reactive power compensation (also called VAR support, because its measured in voltamperes reactive, orVAR). This function, which stabilizes voltage fluctuations on the power
system, was required routinely in industrial countries before low-voltage ride-through also
became common

Every wind turbine extracts some energy from the wind, so the wind leaving the turbine has less
potential energy left in it. In other words, the turbine casts a wind shadow called a wake in the
downwind direction. The wake is a long trail of wind that is not only slowed down, but also quite
turbulent. This is called the wake effect.

rotor diameters for todays wind turbines are typically 60100 meters (about 200300 feet). So a
spacing of five rotor diameters would require that each turbine be 300500 meters away from its
neighbor (1,0001,600 feet)thats up to half a kilometer apart, or almost a third of a mile.

Many wind farm developers rely on power purchase agreements (PPAs) as a way to ensure a
stable price for the wind power over the life of the project. The PPA, which is sometimes called a
power off-take agreement, is a contract under which a utility or other company agrees to buy
wind power from the wind farm developer/owner at a predefined rate or price, typically for a 20year period.
independent system operators (ISOs), which allocate space on transmission lines, maintain
backup power reserves, and match electric supply and demand.
These agencies work closely with utility grid operators and regional transmission organizations
(RTOs) to ensure that electricity flows smoothly where its needed, without congestion or
overloading of vulnerable transmission lines. In Europe, all of these functions are performed by
transmission system operators (TSOs).

prospective investors in a wind farm prefer a PPA over the merchant power option because prices
in wholesale markets (spot or short- term contract) can be volatile from day to day and
unpredictable over the longer term. Moreover, with merchant buyers, the wind farm operator has
little or no prior commitment to take the turbines output.

Wind farm developers have to make a choice between two basic contracting strategies: whether
to go turnkey, or whether to manage multiple contracts, which can exceed 20 on large projects

Onshore wind farms usually rely on project financing, where the lender or underwriter focuses on
the credit of the project rather than the credit of the borrower.

Basically, wind farm operators and other energy producers receive a credit for every unit of
renewable energy they produce. The credits can also be called green tags and renewable
energy or electricity certificates. These credits and certificates can be traded on the open market
for cash, separately from the electricity itself, or they can be bartered.

A single turbine can be commissioned in two or three days by experienced engineers.

In repowering, the existing turbines and foundations are replaced, usually with larger ones.
Decommissioning involves dismantling and removing not only the turbines but also the
underground and overhead power collection and transmission system.

the operator must get the most energy out of each turbine, without overworking it, and must
prevent unscheduled maintenancethe main driver of the cost of operation.

Wind farm operators monitor turbine performance by analyzing data collected from each turbine
by its SCADA system. SCADA data are the key input for operators to maximize energy output,
plan maintenance, and avoid unplanned maintenance.
Typically, the SCADA system organizes the information into 10-minute averages of turbine
operating variables such as rotor speed, blade pitch, energy output, and nacelle position, as well
as data from other wind power system components, such as temperatures and pressures at
various points, water and oil flows, vibration, and power characteristics.
researchers found that turbines overperformed in steady wind, producing more energy than
predicted, and underperformed in turbulent wind,

cost of energy = (capital costs + O&M costs)/lifetime energy capture

larger wind farms tend to experience lower O&M costs than smaller developments.

maintenance procedures should be performed in sweeps, with the crew doing the same job on
as many turbines as possible. Consolidating maintenance into one plant-wide outage, and
scheduling one crane, can save hundreds of thousands to millions of dollars or euros per year in
lost revenue. To reduce the cost of planned maintenance, operators should schedule service
when the wind isnt blowing.

wind farm operators can predict the need for maintenance before it happens unexpectedly by
condition monitoring, or structural health monitoring, of the wind power systems key
components. This is called predictive maintenance as opposed to preventive (time-based, on a
schedule) or reactive maintenance (fix it when it breaks)
Research has shown that preventive maintenance costs 24% less than reactive maintenance,
and predictive maintenance based on condition monitoring costs 47% less. As an extreme
example, the cost of replacing a broken wind turbine blade can be 1020 times greater than the
cost of repairing it before it breaks. Replacing a gearbox ahead of berakdown costs about onethird as much as an emergency job.
Each turbine blade might need as many as 20 sensors measuring loads and other variables such
as temperature.

A better statistic for wind farm operators seeking to improve their turbines run-time is called the
mean time between faults. This is defined as the average number of generating hours between
faults (unplanned events that can be reset automatically or manually. Many wind turbines can
experience anywhere from 100 to 300 faults each year.

One type of faultcircuit breaker tripscan be responsible for up to 50% of a typical wind
turbines total faults

A lot of useful information is hidden in SCADA data. Some failures are related to running hours,
some are related to megawatt-hours generated. There are correlations with turbulence, wind
direction, temperature, specific turbine sites, different manufacturers of the same subassemblies on different turbines, etc.
A turbine-mounted look-ahead lidar unit scans the incoming wind 150400 meters in front of
the turbine (5001,200 feet) and characterizes the wind before it reaches the rotor. The control
system can pitch the blades to maximize energy capture, depending on how the wind is
behaving at that instant and at that height. Also, the yaw system can pivot the turbine into
proper alignment before the wind arrives.

Lightning strikes are the most common cause of fires, and the risk increases with rising turbine
heights.
Another cause of fires and electrical damage is an arc fault, or arc flash. Arc faults occur when
two parts of a system become connected that normally shouldnt be, resulting in a flash of
electrical current and an explosion.

Community wind employs four to six people for one year per megawatt during construction (1.1
1.3 times higher than a commercial farm) and creates 0.3 to 0.6 jobs per megawatt for wind
power plant operations (1.12.8 times higher).These are averages for U.S. project

Chapter 5: Emissions Markets and Products

n 1990, the IPCC issued its first assessment report (AR1), which reflected the views of 400
scientists on the threats posed by global warming.

The Kyoto Protocol (KP) is the result of intensive negotiations at the third meeting held by the
COP in 1997 in Kyoto, Japan. The KP commits Annex I countries to individual, legally binding
targets to limit or reduce their GHG emissions. The KP entered into force in February 2005 driven
by Russias ratification and the first commitment period ran from 2008 and ended in 2012. In
fact, as specified by Article 25 of the KP, the criteria to make the protocol active is that at least
55 parties have signed the protocol.

The three flexible mechanisms of the KP are:

Emission trading (as defined in Article 17 of the KP). Annex I parties can acquire AAUs from other
Annex I parties and use them for compliance under the KP.
Joint implementation (JI, as defined in Article 6 of the KP). The Annex B parties8 can contribute to
their emission targets by investing in emission reduction projects in other Annex B countries.
These investments eventually result in emission reduction units (ERUs) that can be used for
compliance in the KP.
Clean development mechanism (CDM, as defined in Article 12 of the KP). Annex I parties can
undertake emission reduction projects in developing countries (Non-Annex I), which lead to CER
credits. These credits can be used for compliance in the industrialized countries. Contrary to
AAUs and ERUs, CERs come from countries without emission reduction requirements, therefore
augmenting defined emission capacities for Annex I countries.

An allowance, called the emission unit allowance (EUA), gives the right to emit 1 ton of CO2
during a specified period.

The emission-based allocation for an installation is calculated as the installations share of

emissions in the whole sector multiplied by the total allocations to all installations in the sector:

where j = 1,...,n is the jth installation and i = 1,...,T is the ith trading period of the allocation. Ne
corresponds to the amount of allocated permits at time i to installation j; Ebase j,i
j are
the CO emissions of installation j in the base year; and Ebase are the total CO emissions 2s2 of
the entire sector s in the base year.

AB 32 requires California to cut greenhouse gas emissions to 1990 levels by 2020. It also
identifies a cap-and-trade programme as one of the strategies the state will employ to reduce
GHG emissions. During the programmes first compliance period (20132014), large stationary
sources that emit at least 25,000 tCO2-e per year in the industry and electricity sectors will be
covered, including out-of-state generation (i.e., imports). As a cost-control measure, AB 32 allows
entities covered by the scheme to purchase and use offsets for compliance purposes, but
volumes are limited to 8% of annual emissions.

Since coal produces more emissions than gas per 1 MWh of electricity, this leads to higher
emissions, therefore raising the demand for EUAs. If gas prices are low compared with coal, then
installations may switch to gas. Since gas has a lower carbon emission output than coal, the
demand for EUAs would fall.

Let us define ec and eg as the CO2 emission factors of coal and gas, respectively. Also, let hc and
hg be the heating rates of coal and gas, respectively. Heating rates measure how much fuel is
consumed for the production of 1 MWh of electricity. Using these parameters and the coal Ct and
gas Gt time series, we can derive the historical path of the coal-to-gas switch price Et as