“Modeling and Optimizing Generation Portfolios with Complex Hydro Networks” Webinar (November 12, 2015)

Agenda / Expectations Introduction / Company Overview PCI Platform and System Overview PCI Optimization Framework Optimization Model – PCI GenTrader Demonstration Wrap Up / Questions 2

Optimization - Observations Generation portfolio optimization is universal – Reduce costs or increase profits – Value is measurable Robust portfolio optimization is not just UC/ED – More than load, unit data, price data – Fuel, pipeline, A/S, Emission, CC, Transmission, Renewables, etc. – More complex = more need = more value – Automation and integration is crucial Hydro/Thermal Co-Optimization is the Holy Grail 3 Hydro Electric Fuel Markets Thermal Pipelines Wind Emissions Transmission

Optimization within Organizations The “one guy (or gal)” syndrome – Scalable? – Repeatable? – Enduring? – Ability to integrate? – Ability to Automate? The 100MB Spreadsheet – Supportable? – Permission based? – Auditable? – Stable? – Upgradeable? – Enhancements? – Market dependable? – What time horizon? 4

Key Takeaways PCI handles the most complex systems - optimizes thermal and hydro resources across all commodities and markets PCI has consistent data model and optimization engine for short term, long term, and post analytic simulation PCI has open API, auditable, and can be automated for workflow management PCI is a collection of “one-guys (gals)” 5

6 PCI Overview  Company: –Software Development for Energy Markets –180 employees as of 11/2015 –Advanced level/skilled employees –Privately owned – no debt / organic growth. –Offices in OKC, Houston, Raleigh  System: –PCI GSMS (Generation Supply Management System) Portfolio Optimization ISO Bid/Offer Management Bidding Analytics Shadow Settlement Post Analysis Deal Management/ETRM Gas Management Data warehouse & BI  Market: –60% of US generation capacity using PCI –70% of Fortune 500 Utility & Energy companies

Transactional Database, Workflow Management, Communication, Permissions, Auditing, Web Browser Interface, APIs Platform Markets: ALL Front Office AESO CAISO ERCOT IESO MISO ISONE NYISO PJM SPP ISO Communication, Bid/Offer Management, Bid Evaluation, Price Forecasting AESO CAISO ERCOT IESO MISO ISONE NYISO PJM SPP Trading Markets: ALL Deal Capture, E-Tag, Deal Analyst, ICE Interface, Gas Management, Contract Settlement, RT Pricing Asset Operations Markets: ALL Outage Management, Journal, Plant Interface, GADS, Energy (QF) Scheduling, Gas Pipeline Scheduling Post Analysis Markets: ALL Operational Performance Metrics Optimization Markets: ALL ST, LT, Risk P&L Analyzer Settlement Analyzer Position Analyzer Custom Analyzer Custom Analyzer Custom Analyzer Custom Analyzer Custom Analyzer Custom Analyzer PCI Data Warehouse Back Office ISO Shadow Settlement, Allocations, Pre-Settlements, Reporting, Energy Accounting PCI Application Platform 7 PCI GenPortal PCI GenManager PCI GenTrader PCI Deal Management PCI Asset Operations PCI Post Analysis AESO CAISO ERCOT IESO MISO ISONE NYISO PJM SPP MEM AESO CAISO ERCOT IESO MISO ISONE NYISO PJM SPP MEM

What PCI GenTrader Can Do For You 8 LT WM DA Planning: >1 month < 30 years Portfolio Structuring Risk Management Earnings Forecasting Asset Valuation Term Trading Origination Pricing Within Month: >1 day < 1 month Optimize Net Open/Residual Asset Management Outage Management Fuel Forecasting Emission Forecasting Day Ahead: >1 Hour < 1 Week Resource Plan Suggested Trades Open Position Wind Management Fuel Procurement Deal Capture WDPA Within Day: >0.5 Hour < 1 day Intra-day optimal dispatch Outage rescheduling Wind adjustments Deal Capture Post Analysis: >1 Hour < 1 Year Key Performance Indices Outage Costing Transaction Costing Operational Efficiency Operations Planning Day Ahead Post AnalysisReal Time PCI GenTrader Applications Plan with real characteristics Forecast with real characteristics Execute with real characteristics React with real characteristics Measure and improve with real characteristics

PCI GenTrader – Feature Evolution 9 Unit Commitment Economic Dispatch Load & Generation Constraints: *Fuel *Transmission Opportunity: *Ancillary Services Opportunity: *Markets *Options Constraints: *Combined Cycles Constraints: *Emissions *Renewables Opportunity: *Hydro Thermal Co-optimization Improved computational power and speed increases Improved optimization logic enhancements and methods

Optimization: Maximize Profits Find (solution variables) – Generation schedules – Bilateral purchases and sales – Market purchases and sales – Fuel purchases and sales Such that (objective function) – We can achieve maximum Profit = REVENUE – EXPENSE While meeting the constraints Supply = Demand Respects physical limitations 10

GenTrader Input and Output 11 l Markets l Power Markets l Fuel Markets l Depth and tiers l transmissions l pipelines l Prices l LMP curves l Energy l Ancillary Services l Fuel l Volatility l Correlations l Generator Characteristics l reservoirs/waterways l operating limits l ancillary capabilities l ramp & cycling limits l heat rates l hydro power curves l emission rates l startup profiles l planned & forced outages l Contracts l Options l Forward (quantity risk) l Energy l Ancillary services l Fuels l Emissions l Financial Data l Revenue and expense l Mark-to-Market P&L l Production costs l O&M costs l Emission costs l Expected portfolio P&L l Portfolio Risk Exposure l Arbitrage opportunities l System Net Open Position l Physical Data l Optimized unit schedules l Energy & Ancillary Services l Combined-cycle operation l Waterway flow schedules l Reservoir elevation levels l Contract schedules l Recommended option exercise l Fuel consumption l Capacity factors, starts/stops l Emission constraints l Outages l Study Types l 1 hour to 30 years l Optimized UC l Fixed UC l Run Modes l Portfolio l Stress Test l Stochastic *stochastic information

Optimized Plan Workflow in EIM Market 12 OD+0 OD+1..7 Day-Ahead Plans Day-Of Plans PCI GenTrader Load Forecast Ancil Svc Req. Unit Outages Fuel Prices Hydro Cond. Optimal Balanced Schedules Energy Regulation up/down Spin Reserve Non-spin Reserve Transmission …

GenTrader Optimization Capabilities 13 Portfolio Manager Fuel Manager Fuel Markets Fuel Contracts Pipelines Storage Emissions Water Manager Hydro System Cascaded Reservoirs, Waterways and Generating Units Hydro Electric Asset Manager Power Trader Scheduler Power Markets Power Gen Loads Power Contracts Trans-missions Ancillary Services Wind Solar Generation/Trans- mission Planner Demand Response

PCI GenTrader Data Models 14 Price Library [ Power ] Power Market [ Purchase ] Plant Power Market [ Sale ] Unit Forward / Option [ Sale ] Reservoir Hydro Unit Fuel Market [ Purchase ] Price Library [ Fuel ] Fuel Market [ Sale ] Forward [ Sale ] Forward / Option [ Purchase ] Forward [ Purchase ] NOx CO2 and Other Emissions SO2 Waterway

Hydro-Electric Network Optimization Optimize thermal and hydro resources across all commodities and markets Consistent data model and optimization engine for all both short term and long term simulation Fully integrated and automated or stand-alone deployment Support operational planning, trading, and bidding activities 15

Hydro Network Optimization Network topology – reservoirs, waterways, power houses and pumps. Optimal scheduling of water flow (cfs), reservoir elevation level (ft), and power generation (MW) Comprehensive hydro-electric characteristics – Head/Flow dependent generation efficiency (cfs/MW/ft) – Head/Flow dependent pumping efficiency – Reservoir storage function – Tailrace elevation function 16

Hydro Network Optimization Non-linear Head-Dependent Hydro-Electric Conversion Function – Pumping and generation – Varying water to power rate with head level – Up to 10 head segments and up to 10 MW breakpoints for each head segment – Tailrace level (optional), which could reduce head, could be affected by the rate of water discharge at outlet. 17

Hydro Network Optimization Reservoir model – physical min/max storage limits – target lower/upper bounds with violation costs Waterway model – Min/Max flow limits – Direct and reverse flow costs – Multiple waterways between reservoirs Hydro Generating/Pumping Units – Operating limits, cycling constraints, O&M costs – Multiple units on a single penstock – Multiple penstocks for a unit 18

Hydro Network Topology 19 Generator/Pump Reservoir Ground Connector Hydro Nodes Runoff Penstock Spillway Water Release Waterways

Reservoir Model 20 Storage Function – Elevation vs Volume Storage Limits – Hourly min and max End-of-period Target Levels – Hourly lower and upper bounds with violation costs Natural Runoff – Hourly inflow and outflow

Waterway Model 21 Waterway Types – Penstock – Spillway – Bypass Controls – Hourly min/max flow – Flow ramp rate – Spillway gate – Delays Costs – Direct flow costs – Reverse flow costs

Generator Model 22 Capabilities – Hourly High/Low Operating Limits – Generation and Pumping Capacity – Ancillary Services spin/non-spin, reg-up/reg-down, etc. Efficiency – H/K curves (head-dependency) – Pumping efficiency Constraints – Minimum up/down time – Time between gen and pump modes – Must-run – Startup sequence Cost Characteristics – Startup costs – O&M costs

Study Setup 23 Same model used for 1- hour to 30-year studies by setting begin and end dates Gas-day or Reservoir-day definition could be different from calendar day Handling of NERC Holidays in Standard Product Definition Support both Optimized Commitment and Fixed Commitment Reserve sharing

Modeling Capabilities Study Types – Short Term and Long Term – Portfolio and Stress Test – Stochastic Analysis Markets – Markets and transmissions – Price libraries Contract Types (power, fuel, emissions) – Forward – Options Generation Asset Model – Heat rates and pump/generation efficiency – Generating units and reservoir/waterway operating limits – Ancillary service capabilities – Cycling constraints, emission constraints, fuel constraints – Multi-stage units (combined cycle) 24

Input Data 25 Markets BAs ISOs Transmission Power Transport Fuel Price Libraries Price index Forward curves Contracts Buy/Sell Commodities Emission Allowances Generation Assets Plants and units Hydro Networks Unit fuel supplies Emission sources

Running a Study 26

Output Data 27

Multi-Stage Unit Model Distinct Stages – Operating limits – Ancillary service capabilities – Heat rates – Ramp rates – Min up/down times – Fuel sources and blends – Emissions one stage ≈ one simple cycle unit Transition Matrix – Transition allowed/disallowed – Transition time – Transition cost – Transition fuel consumption – Transition constraint 28 Model of a 3-Stage Unit

Ancillary Service Scheduling and Dispatch Balanced Ancillary Service Schedules – Supply >= demand for every a/s type in every period – Clearly identifiable individual resource supplying a/s – Required by ISOs to feasibility and dispatch instructions 29 Ancillary Service Requirement vs Responding Resources