APEx Conference 2016 October 12-14, Medellin Panel 1 – Value of Markets and Future Development Presenter: Sankaran.Rajagopal@Siemens.com Restricted © Siemens AG 2016 usa.siemens.com/digitalgrid

Value of Markets and Future Development Table of contents Glance of trends in gas and electricity topics of US Gas and electricity markets coordination in progress Development efforts - salient samples of solutions in progress Managing the high gas fired generation in the energy mix Reducing gas dependency of energy mix

Significant acceleration of natural gas and renewables ===>> US EIA Outlook 2016 – Clean Power Plans accelerate the shift in energy mix Significant acceleration of natural gas and renewables ===>> Implication: Acceleration of gas-electricity operational coordination, grid operators’ reserve management techniques, gas-electricity couplings modeled Source: Annual Energy Outlook September 2016 www.eia.gov

Shale Gas Era – Gas and Electricity Prices Outlook in U.S. [1] Source: Annual Energy Outlook September 2016 www.eia.gov

LNG Outlook Low oil price weakens LNG success Low cost of transportation assists LNG success New and widened Panama Canal – June 2016 Source: www.eia.gov Source: www.nytimes.com Panama Canal June 22, 2016

Gas and Electricity Dependencies to Bear in Mind… 2011 Southwestern Outages and 2014 Polar Vortex illustrated the vulnerabilities of gas electricity mix during harsh winter Fact: largest fuel for US electricity generation is gas, since the shale gas expansion Natural gas demands for heating and electricity peaking together in winter Reserves and capacities from gas fired generations in grid dispatch were not realizable Brown outs: Compressors of pipelines are electricity operated Harsh winter freeze causing gas flow issues and black start generators readiness problems Regions and plants at the end of the pipe line are vulnerable in case of high upstream usage 6

Assessment of Capacity of Available Gas and Gas Fired Generation Examples of Modeling in progress for generation dispatch problems: Gas network and constraints Modeling of pipe lines and storages for capacity determination Gas contingencies US relies on gas production more than storage. Asia and Europe plan much higher percent of gas in storage due to scarcity Source: www.eia.gov

US Grid Operators Gas-Electric Coordination – MISO Example Midwest Independent System Operator - Day Ahead Market awards posted ahead of deadline of timely gas nominations PJM plans1:30 pm Day Ahead awards, before the 2 pm gas deadline for timely nomination cycle FERC 787: Real time sharing of operational and non-public information between the grid and gas operators and interstate pipelines Source: www.misoenergy.org www.pjm.com 8

Siemens Spectrum Power™ SCUC Example Security Constrained Unit Commitment Several gas types (firm and interruptible) Layers of gas constraints (Florida Power and Light Example) Gas burn Limits as daily and hourly constraints for - Unit, Plant, Pipeline and Area layers Fuel mix optimization (dual fuel plants w/ gas and oil mix) - hourly settings of optimal ratios. LNG – Gas-Oil mix is next. In regions of high CC plant usage, exhaustive modeling and optimization of multi-stage configurations in look-ahead formulation yields large $ savings in cost of operation

Managing Ramping Challenges with Gas Fired Generation in California Siemens Spectrum Power™ SCUC Solutions in CAISO Exhaustive CC plant configuration commitment and dispatch in DA and RT– high cost savings Pay for performance - fast gas turbines and storages in regulation – reliability increase and incenting fast generators Flexible Ramp Constraints – reliability increase Flex Ramp - AS Product in CAISO (October 2016) – incenting fast gas fired generators and storages Ramp as a function and Ramp Sharing (En, AS) modeling for a realistic and achievable dispatch Daily Net Load (Load-Variable Gen.) Curve in California Source: www.caiso.com

Optimizing and achieving lower gas infrastructure cost in Europe Integrated Approach of gas-based fleets (joint optimization of gas and power operations and use power system flexibility => significantly lower costs Standard Approach of gas-based fleets operation Extending this analogy to US: DERs and DR offer the flexibility and lower cost alternative to Gas fired generation Source: Benefits of Integrating Regions in Europe, G. Tarel, Artelys Optimization Solutions , FERC conference on Markets Software – June 2016

DERP Initiative of CAISO – Limits Gas Fired Generation Use Distributed Energy Resource Provider initiative of CAISO: DER Provider can be a scheduling coordinator to CAISO or provide services thru’ an SC DERP’s bundle the roof-tops, storages, DR and offer to wholesale Initiative will limit the gas fired generation dispatch

Solutions in the (gas) pipeline Managing the high gas – electricity dependency Just as we modeled physical system (network) constraints in US Markets => Gas network model and gas contingency constraints are short term needs – already available Slow moving - gas flow dynamics, gas storages, locational aspects or prices being considered in the gas industry optimization problem (FERC conference papers of Market Software, June 2016) Co-optimization formulation for gas-electricity with locational aspects represented in commitment/dispatch problems Reducing the gas – electricity dependency Initiatives of 1325 MW of storages and 12,000 MW of DER’s added by 2020 – California mandates reduce gas fired generation needs Initiatives of DERP in California, and REV in New York are gearing the industry towards lesser dependency on Gas as fuel and to limit the cost of infrastructure 13

Thank you for your attention! Questions/Answers… Restricted © Siemens AG 2016 usa.ciemens.com/digitalgrid

Contact Sankaran Rajagopal, Ph.D. in E.E. Director, Energy Market Management Systems Siemens Digital Grid SWS 10900 Wayzata Boulevard, Suite 400 Minnetonka, MN 55305 Phone: +1 612 801 9909 Email: sankaran.rajagopal@siemens.com Ravi Pradhan Vice President, Technology Siemens Software and Services Phone: +1 612 810 6842 Email: ravi.pradhan@siemens.com