Variable Operations & Maintenance (VOM)
Costs
QSE Managers Working Group Meeting
August 15, 2007
Ino Gonzalez
Lead, ERCOT Settlements and Billing
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Objectives
1. Three-Part Offer
2. Variable Operations and Maintenance (VOM) Costs
- Startup
- Minimum energy
- Energy Offer – Real Time Mitigation
3. Options for submitting VOM Costs
- PJM’s Maintenance Methodology
- California ISO approach
- Other proposals
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Three-Part Supply Offer
Consists of:
Startup Offer
Minimum-Energy Offer
Energy Offer Curve
$/MWh to Operate at
Given MW Quantity
Above Low
Sustained Limit
$ to Startup
$/MWh to Operate at
Low Sustained Limit
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Three-Part Supply Offer (continue)
– The Startup Offer component represents all costs incurred by a
Generation Resource in starting up and reaching breaker close.
– The Minimum-Energy Offer component represents the costs
incurred by a Resource in producing energy up to and including the
Resource’s Low Sustained Limit (LSL) after breaker close.
– The Energy Offer Curve represents
• an offer to sell energy at or above a certain price and at a
certain quantity in the DAM or
• a willingness to dispatch a given unit in Real-Time.
– Startup Offers, Minimum-Energy Offers, and Energy Offer Curves
are capped.
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Texas Nodal
Start-Up Offer Cap
Start-Up Offer Cap ($/start)
Plus
Verified Actual Fuel (MMBtu) x Gas % x FIP ($/MMBtu)
($/start)
VOM ($/start)
Note: Assuming a gas-fired unit
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Texas Nodal
Minimum Energy Cost Cap
Minimum Energy Offer Cap ($/MWh)
@ LSL
Plus
Verified Actual Fuel (MMBtu/MWh) x Gas % x FIP ($/MMBtu)
($/MWh)
VOM ($/MWh)
Note: Assuming a gas-fired unit
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Texas Nodal
Energy Offer Curve Mitigated Cap
Mitigated Energy Offer Cap ($/MWh)
Max
[ {Verified Incremental Heat Rate x FIP} + VOM ] x Multiplier
($/MWh)
14.5 (or 10.5) Heat Rate x FIP ($/MWh)
Note: Assuming a gas-fired unit
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Texas Nodal
Options for creating and Verifying VOMS
Option 1: PJM Operating and Maintenance Guidelines
1.
2.
3.
4.
5.
6.
7.
8.
Uses FERC Accounts to estimate maintenance dollars
Uses Handy Whitman Index to determine Escalation Factor
CT maintenance adder based on Equivalent Service Hours
Steam Units maintenance adder based on total dollars per fuel ($/MMBtu)
Allows for Long-Term variable maintenance costs to be included
Maintenance period = rolling 20-year historical period
Uses standard equation to calculate Equivalent Service Hours
Resources no longer required to submit costs to FERC
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Texas Nodal
PJM Approach – Thermal Units
Nuclear and Fossil Steam Units
Sample Formula of Maintenance Adder for the Year 1998
TMD = (A +B – C)97 X F98/F97 + (A +B – C)96 X F98/F96 + … (A +B – C)78 X F98/F78
TFuel = TFuel97 + TFuel96 + TFuel95 +……+ TFuel78
TSD = C97 X F98/F97 + C96 X F98/F96 + … C78 X F98/F78
TS = S97 + S96 + … S78
MA98 = TMD / Tfuel ($/MMBtu)
SMA98 = TSD / TS ($/start-up)
Where:
TMD = Total Maintenance Dollars (for the Maintenance Period).
A = Total dollars in FERC Account 512.
B = Total dollars in FERC Account 513.
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
PJM Approach – Thermal Units
Where:
C=
Costs included in FERC Accounts 512 and
513 that a company determines are start-up related.
F=
Escalation Factor for a particular year (Handy - Whitman Index.)
TFuel = Total fuel burn or heat released (for same years as used in TMD).
Fuel =
Total annual fuel consumed.
TS =
Total Starts
TSD =
Total Start maintenance Dollars
S=
Number of Starts per year.
MA =
Maintenance Adder ($/unit of fuel or heat)
SMA =
Start Maintenance Adder ($/start-up)
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Texas Nodal
PJM Approach – Thermal Units
Comments:
1. Total Maintenance Dollars (TMD) plus Total Start maintenance Dollars
(TSD) cannot exceed Total dollars in FERC Accounts 512 and 513.
2. Units with less than seven years of history are considered immature. Such
units can be assigned their calculated MA and/or SMA, or a forecast value,
subject to approval by the PJM MMU.
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Texas Nodal
PJM Approach – Combustion Turbines
Combustion Turbine Maintenance Cost Calculation
• The Maintenance Adder for combustion turbines will be calculated and
applied on a "per equivalent service hour" basis. The calculation will be
based on actual operation and escalated maintenance expenses for all
available years in the Maintenance Period.
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Texas Nodal
PJM Approach – Combustion Turbines
CALCULATION OF HISTORICAL RATE
Equivalent service hours (ESH)
ESH = (A x Number of Starts) + Z hours + (B x Y hours)
Where:
A = Cyclic starting factor (A = 5.0 for aircraft - type CT's; A = 10.0 for
industrial - type CT's)
For example, the incremental maintenance charged to one start on an industrial type CT is equivalent to the incremental maintenance attributable to ten hours of
base load operation.
B = Cyclic peaking factor (B = 3.0 for all CT's)
This means that the additional incremental maintenance charged to the incremental
energy between base and peak loads is equivalent to the incremental maintenance
attributable to three hours of base load operation.
Z = Total unit operating hours at any load level.
Y = Hours above base load temperature limit.
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
PJM Approach – Combustion Turbines
Note: ESH must be calculated using all available history in the
Maintenance Period. PJM members may propose alternative cyclic
starting factors or cyclic peaking factors for individual units. Such
alternative factor proposals should include supporting documentation
(e.g., manufacturer recommendation) of this new factor, to be reviewed
for approval by the PJM MMU, on a case-by-case basis.
Total Maintenance Dollars (TMD) sample calculation for 1998
TMD = D97 x F98/F97 + D96 x F98/F96 + … D78 x F98/F78
Where:
D = Total dollars in FERC Account 553 for a particular year.
F = Escalation Factor for a particular year based on Handy - Whitman Index.
Note: TMD must be calculated for the same historical period as ESH.
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Texas Nodal
PJM Approach – Combustion Turbines
Equivalent Hourly Maintenance Cost (in $/hour) (EHMC)
ESH = TMD / EHMC  EHMC = TMD / ESH
Where:
TMD = Total maintenance dollars
ESH = Equivalent service hours
Comments:
•
Units with less than seven years of history are considered immature.
Such units can be assigned either their calculated EHMC, or a forecast
value, subject to approval by the PJM MMU.
•
If any unit in a block is at least seven years old, then all like units on
the block may be considered mature.
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
PJM Approach – Combustion Turbines
APPLICATION OF EHMC TO FUTURE OPERATION
Rates assigned to future operation.
Starting Maintenance Cost ($/start) = A x EHMC
Where:
A = Cyclic starting factor as defined above
Hourly Maintenance Cost ($/Hour) = EHMC
This hourly value is assigned as a capacity cost and is independent of unit
loading.
Peak Incremental Maintenance Rate ($/MWh) = B/peak pickup X EHMC
B = Cyclic peaking factor as defined under Section
Peak pickup is equal to the difference between a CT's energy outputs at base
and at peak loading levels.
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Texas Nodal
PJM Approach – Combustion Turbines
Comments:
1. The above formulations are applicable for determination of Maintenance
Adders for both aircraft and industrial type combustion turbines.
2. CT incremental costs can be developed and applied on either a unit-by-unit
basis or by groups of units.
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
PJM Approach – Combustion Turbines
Example: Combustion Turbine Maintenance Adder
(Industrial Unit)
Peak Hours
y = 200 Hrs.
Service Hours
Z = 2000 Hrs. (Total Base Peak Hours)
No. of Starts = 300 Peak Pickup = 5 MW
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
PJM Approach – Combustion Turbines
Calculation
1. TMD = $100,000 (Actual historical maintenance data escalated to present
value).
2. A = 10, B = 3 (Note: A = 5 for aircraft engine CT's).
Equivalent Hourly Maintenance Cost = EHMC
EHMC = $100,000 / [ (10X300) + 2,000 + (3X200) ] = $17.86 /Hr.
3. Calculation of maintenance rates
Starting Maintenance Cost = A X EHMC = 10 x $17.86 = $178.60/start
Hourly Maintenance Rate = EHMC = $17.86/Hr.
Peak Incremental Maintenance Rate = B/(peak pickup) x EHMC
Peak Incremental Maintenance Rate = 3 X $17.86/5 = $10.72/MWh
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Options for creating VOM Costs
Option 2: QSE Specific Methodology

Approved by ERCOT in advance
Pros

Applicable to specific resource company
Cons


May be difficult to verify by ERCOT
May require additional ERCOT staffing
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Options for creating VOM Costs
Option 3: Use a fix value for VOM



California ISO uses a $6/MWh value
May fix value by unit type
May fix value for each cold, intermediate and hot start
Pros



No need to verify
Easy for market to understand
No need for additional ERCOT staffing
Cons


Market has to agree to actual value (s)
May not represent true VOM costs
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Options for creating VOM Costs
Option 4: Use actual VOM submitted by resource



Actual VOM of resource
Values signed by an officer of company
Values signed by a licensed (PE) engineer in state of Texas
Pros


Simple verification
No need for additional staff
Cons


ERCOT will have some limited verification
ERCOT may audit anytime
© 2005 - 2006 Electric Reliability Council of Texas, Inc. All rights reserved.
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Texas Nodal
Typical VOM Values
Table 1: Generic Unit Characteristics (in 2005 Dollars)
Variable O&M
($/MWh)
Fixed O&M ($/kWyr)
Minimum
Downtime (Hrs)
Minimum Uptime
(Hrs)
Combined Cycle
$ 2.50
$ 21.00
8
6
2 Blocks, each 50% at FLHR
Combustion
Turbine <100 MW
$ 7.00
$ 15.00
1
1
One block
Combustion
Turbine >100 MW
$ 7.00
$ 15.00
1
1
One block
Steam Turbine
[coal] >200 MW
$ 1.00
$ 35.00
12
24
4 blocks, 50% @ 106%FLHR, 15% @ 90%, 30% @ 95%, 5% @ 100%
Steam Turbine
[coal] <100 MW
$ 3.00
$ 45.00
6
8
Steam Turbine
[coal] <200 MW
$ 3.00
$ 35.00
8
8
Steam Turbine
[gas] >200 MW
$ 3.00
$ 30.00
8
16
Steam Turbine
[gas] <100 MW
$ 5.00
$ 34.00
6
10
Steam Turbine
[gas] <200 MW
$ 4.00
$ 30.00
6
10
Steam Turbine
[oil] >200 MW
$ 3.00
$ 30.00
8
16
Steam Turbine
[oil] <100 MW
$ 5.00
$ 34.00
6
10
Steam Turbine
[oil] <200 MW
$ 4.00
$ 30.00
6
10
Unit Type & Size
Heat Rate Shape
4 blocks, 25% @ 118%FLHR, 30% @ 90%, 35% @ 95%, 5% @ 103%
4 blocks, 25% @ 118%FLHR, 30% @ 90%, 35% @ 95%, 5% @ 103%
Source: US Department of Energy: CRA No.D08554-00
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Texas Nodal
Typical VOM Values
Table 3. Gas Turbine Non-Fuel O&M Costs (Year 2000)
1 MW
5 MW
Variable (service contract) ($/kWh)
0.0045
0.0045
Variable (consumables) ($/kWh)
0.0001
0.0001
40
10
Fixed ($/kWh @ 8000 hrs/yr)
0.0050
0.0013
Total O&M Costs ($/kWh)
0.0096
0.0059
Electricity Capacity
O&M Costs 14
Fixed ($/kW-yr)
(14) O&M costs are based on 8,000 operating hours expressed in terms of annual electricity generation
Source: Technology Characterization: Gas Turbines; Climate Protection Partnerships Division,
Environmental Protection Agency, Washington, DC. February 2002
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Texas Nodal
Summary - Options for creating VOM Costs
Option 1: PJM Operating and Maintenance Guidelines
Option 2: QSE Specific Methodology
Option 3: Use a fix value for VOM by resource type
Option 4: Use actual unit VOM submitted by resource
What is the best option?
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Texas Nodal