Energy Risk Management Case Study: Real-World Results

The Challenge

Identify the Most Cost-Effective Clean Energy Option

Legacy Approach Results

• Customer X wanted to procure clean power to serve a ~100MW industrial load in MISO (Midcontinent Independent System Operator)
• A spreadsheet analysis approach suggested an ERCOT (Electric Reliability Council of Texas) wind virtual power purchase agreement (vPPA) would deliver the lowest-cost clean energy supply option

The Solution

Aria Risk Management Analysis

Aria’s analysis included the cost of the 100MW load in MISO alongside the vPPA.

A More Nuanced Outcome

• Normal power prices differ between ERCOT and MISO, creating basis risk
• That price difference meant that buying clean energy outside MISO resulted in a wide distribution of forecasted energy supply costs
• While ERCOT wind has the lowest average cost, it was a risky supply option for a MISO load

MISO Solar Is Good….

MISO solar results in a tighter cost distribution, albeit with some shape risk.

Higher cost, but lower risk

• Using MISO solar to power the MISO load resulted in a much tighter distribution of energy supply costs (i.e., less potential variability)
• Some variation remained due to shape risk (i.e., the facility load would still be exposed to wholesale market prices outside of solar hours)

….But MISO Wind Has Least Risk

MISO wind resulted in the tightest distribution of energy supply cost.

Highest cost, with least risk

• MISO wind was the highest-cost renewable option
• HOWEVER, it resulted in the tightest distribution of energy supply cost due to the wind generation profile closely mirroring the load shape

The Results

An Informed Risk/Reward Decision

Cost/risk “efficient frontier” empowered Verse’s customer to choose its optimal supply portfolio.

Deeper Analysis Supported Better Decisions

• Instead of showing just the least-cost options, Verse’s analytical models allowed the customer to make a data-driven decision about risk/reward trade-off
• Based on this information, the customer deprioritized ERCOT wind in the subsequent RFO process in favor of less risky renewable supply portfolios in MISO