buy - back strategy group ,
this is an email i sent to our generators regarding decing and buy - back strategies . please read so you know what ' s going , and can take the lead on implementing these strategies . we ' ll let you know when all the generators on board .
thanks ,
stan
due to the relatively weak real - time market during morning hours , we wanted to communicate a strategy for dec . bidding or buying - back generation that you ' ve sold forward . we want to stress that this is a relatively short - term strategy . as the weather turns cold during the late - autumn and winter months , the morning hours actually trade at a premium on the real - time market .
lately , hel - 10 have been very weak real - time , ranging between $ 25 and $ 40 . we have two strategies that we would like to suggest :
1 . decremental supplemental bids
we can submit dec . bids to the iso at a price below your cost to generate . basically , we would be letting the iso know that we ' re willing to reduce generation and actually buy the mw ' s from the iso to cover the prescheduled quantity . you are still paid the day - ahead price for the day - ahead quantity , but instead of generating it , you would be buying it from the iso . for example , if your cost to generate is $ 40 , and you sell day - ahead for $ 50 , you make $ 10 / mwh . if the iso takes the decremental bid , and the price is $ 30 , then you make $ 20 / mwh .
advantages - a relatively large upside , the price the iso charges could actually go negative , as large as negative $ 91 . 87 . also , you would actually be buying from the iso , as opposed to selling to the iso and being subject to credit risk .
disadvantages - ten minute dispatch . when we submit decremental bids , the iso has the option to either reduce or increase output of the unit every 10 minutes . in addition to the physical problems this might create , the settlements statement you receive might be relatively elaborate and possibly difficult to follow .
2 . buying - back blocks in the bi - lateral market :
this strategy calls for our real - time traders to buy blocks of energy in the bi - lateral market for below your cost to generate . this would call for you to reduce your generation , and the energy we buy - back in the real - time market would be used to fill your prescheduled quantity . once again , you are still paid the day - ahead price for the day - ahead quantity , but instead of generating it , you would be buying it at the price paid to buy - back the energy . as in the previous example , if your cost to generate is $ 40 , and you sell day - ahead for $ 50 , you make $ 10 / mwh . if we can buy - back the energy for a price of $ 30 , then you make $ 20 / mwh . additionally , if we do buy - back the energy , we will need to simultaneously submit incremental supplemental bids to the iso to remain compliant with the ferc order . then , if the iso takes the incremental bid , you can generate the power and sell for additional profit .
advantages - no 10 minute dispatch ( unless a supplemental bid is accepted ) . you would know exactly when and for how long the unit would be down or reduced . also , the settlements statements would be relatively easy to manage .
disadvantage - not as large of an up - side as decremental bidding .
at this point in time we would encourage you to start with the strategy # 2 , buying - back blocks of energy in the bi - lateral market . once you and our real - time traders get comfortable with the operations of the strategy , then we should move forward and start submitting decremental supplemental bids to the iso . we propose a 50 / 50 profit split , above your day - ahead profit , earned from either of these two strategies .
if you have any questions or comments please call myself or chris foster .
stan cocke
the services desk
503 - 464 - 3829
buy - back strategy
group ,
this is an email i sent to our generators regarding decing and buy - back strategies . please read so you know what ' s going , and can take the lead on implementing these strategies . we ' ll let you know when all the generators on board .
thanks ,
stan
due to the relatively weak real - time market during morning hours , we wanted to communicate a strategy for dec . bidding or buying - back generation that you ' ve sold forward . we want to stress that this is a relatively short - term strategy . as the weather turns cold during the late - autumn and winter months , the morning hours actually trade at a premium on the real - time market .
lately , hel - 10 have been very weak real - time , ranging between $ 25 and $ 40 . we have two strategies that we would like to suggest :
1 . decremental supplemental bids
we can submit dec . bids to the iso at a price below your cost to generate . basically , we would be letting the iso know that we ' re willing to reduce generation and actually buy the mw ' s from the iso to cover the prescheduled quantity . you are still paid the day - ahead price for the day - ahead quantity , but instead of generating it , you would be buying it from the iso . for example , if your cost to generate is $ 40 , and you sell day - ahead for $ 50 , you make $ 10 / mwh . if the iso takes the decremental bid , and the price is $ 30 , then you make $ 20 / mwh .
advantages - a relatively large upside , the price the iso charges could actually go negative , as large as negative $ 91 . 87 . also , you would actually be buying from the iso , as opposed to selling to the iso and being subject to credit risk .
disadvantages - ten minute dispatch . when we submit decremental bids , the iso has the option to either reduce or increase output of the unit every 10 minutes . in addition to the physical problems this might create , the settlements statement you receive might be relatively elaborate and possibly difficult to follow .
2 . buying - back blocks in the bi - lateral market :
this strategy calls for our real - time traders to buy blocks of energy in the bi - lateral market for below your cost to generate . this would call for you to reduce your generation , and the energy we buy - back in the real - time market would be used to fill your prescheduled quantity . once again , you are still paid the day - ahead price for the day - ahead quantity , but instead of generating it , you would be buying it at the price paid to buy - back the energy . as in the previous example , if your cost to generate is $ 40 , and you sell day - ahead for $ 50 , you make $ 10 / mwh . if we can buy - back the energy for a price of $ 30 , then you make $ 20 / mwh . additionally , if we do buy - back the energy , we will need to simultaneously submit incremental supplemental bids to the iso to remain compliant with the ferc order . then , if the iso takes the incremental bid , you can generate the power and sell for additional profit .
advantages - no 10 minute dispatch ( unless a supplemental bid is accepted ) . you would know exactly when and for how long the unit would be down or reduced . also , the settlements statements would be relatively easy to manage .
disadvantage - not as large of an up - side as decremental bidding .
at this point in time we would encourage you to start with the strategy # 2 , buying - back blocks of energy in the bi - lateral market . once you and our real - time traders get comfortable with the operations of the strategy , then we should move forward and start submitting decremental supplemental bids to the iso . we propose a 50 / 50 profit split , above your day - ahead profit , earned from either of these two strategies .
if you have any questions or comments please call myself or chris foster .
stan cocke
the services desk
503 - 464 - 3829