There are over 20,000 existing generation plants of various types in disparate locations throughout North America.
In order to capture profits and shareholder value, owners of those plants must optimize operation given the forward
market price of electricity at their busbar less the forward market price of the fuel at their point of purchase-
a price differential called a "spark spread." Owners must "chase price" with their plants. A new greenfield
generation unit must optimally sell electricity into its busbar market at the forward market
priceand buy fuel at
its point of delivery at the forward market price and have enough money left over
to repay at a minimum the full capital cost of the unit (in a present value sense). Traders who own "paper" assets capture profit only
if forward market prices from which paper assets derive value move the right way (hence the term "derivative.") Consumers must shop
prudently and accurately for the lowest cost electricity, and their ability to do so depends on the forward market price in the region
in which they consume.
Vince Lombardi once said: "Winning isn't everything, it's the only thing." To Altos, "Price isn't everything; it's
the only thing." Altos' North American Electricity Model is the premier forward price prognostication tool in
the natural gas industry. Mike Rescoe, CFO of PG&E Corporation said of Altos technology: "This is good science."
Click to enlarge image.
The Altos North American Electric model simulates how regional
interactions between fuel supply, generation, inbound transmission,
outbound transmission, load, and consumption interact to determine market clearing prices, flowing energy,
and new capacity additions at each forward point in time. The geographic scope of the model is indicated in the schematic map.
Automated data input:
Given the size and sophistication of the Altos data base, it is not realistic to
input or manage it manually. Instead, Altos offers fully automated data input from a series
of Excel spreadsheets that house the data base. Automated input allows you to customize and
adapt the data to whatever regionalization of your model you want.
Click to see complete network of supply chains.
What does the output of the model look like and how is it used?
The answer comes from our December 1998 Duke New Smyrna Beach testimony before the Florida PSC.
Our model was used to calculate market clearing prices for every forward hour in every forward year for every region of North
American including the FRCC. In the diagram, the hours of each month have been aggregated into five increments that are designated
on the diagram. The diagram incidates what the market prices in Florida will be, how much the plant will run, how much margin it will
capture for each hour of run time, and therefore how much money the plant is worth.
Altos offers the North American electricity model in several ways:
(1.) We offer a software license that allows for ongoing, inhouse, independent use by your staff, including all fuel,
generation, transmission, load, and consumption data.
(2.) We use the model in concert with and as part of our consulting assignments with no
requirement that you take delivery of the model.
(3.) Altos offers previously prepared North American electric model runs made under Altos' reference case assumptions.
(4.) Altos offers the underlying fuel, generation, transmission, load, and demand data base on a standalone basis completely
distinct and unbundled from the North American electric model. The model is now implemented within MarketPointTM, a new
proprietary software system that allows full graphical implemention of regionality and technology, full Excel emulation of
inputs and outputs, and fully automated reporting of model results.
say
"Altos did a fine job working with many different TVA personnel, collecting the information, analyzing the problem, and effectively communicating the results and conclusions. The insights that we have gained from this analysis could result in a significant savings to TVA that could be in the order of millions of dollars."
Tennessee Valley Authority
E.R. Ennis, Plant Manager
Experience.
Experience must complement brilliance. Winners like Altos are experienced at what we do. We have grappled with many business problems, some similar and some dissimilar to yours. Winners like Altos borrow solutions from other industries and combine them with the specifics of your situation, thereby focusing the best science and experience on your problem.
decisions
1975. President Ford announced in his State of the Union speech his intention to subsidize 1 million barrels per day of synfuels capacity by 1985 as part of Project Independence. Our work, commissioned by Dr. William McCormick now CEO of CMS Energy in the face of massive political pressure to subsidize synfuels entry, convinced the federal government to stay out of the "white elephant" synfuels business. Our model portended that any coal gasification plant that was actually built (such as the Great Plains coal gasification plant) would be an economic white elephant paid for in full by taxpayers, good for nothing except perhaps for holding disco dances inside the gasifiers or building water slides along the conveyor belts.
Contact Us: Altos Management Partners
Corporate Head Office
Los Altos, California
ph: (650) 948 8830
fax: (650) 948 8850
Publications Altos offers downloadable publications and
bibliography of past publications by Altos
and non-Altos people.
Organizations should contact us for
password privileges.
