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March 8, 2020

A Quick Review of Outage Cost Analysis

Outages can pose a significant risk to generation asset managers. Some outages are under managers’ control, such as routine planned maintenance, while other outages are unexpected, including forced generator outages due to mechanical failure or transmission outages from severe weather events. Outages add to the complexity of energy risk management – risk managers may have a strategy for effectively hedging market risk but could be significantly over-hedged during an unexpected outage. cQuant’s Outage Cost Analysis (OCA) model gives risk managers a powerful tool to improve scheduled maintenance planning and more effectively manage outage events.

Methodology

The OCA model is smoothly integrated within the cQuant Analytics Platform, allowing it to leverage cQuant’s stochastic Monte Carlo price simulation and asset dispatch models to evaluate outage risk across a range of simulated future price scenarios. This facilitates a robust analysis of outage costs, allowing risk managers to model the expected cost of an outage as well as the distribution of possible outage costs around the mean. OCA has the flexibility to model the costs of both partial (e.g. one turbine of a combined cycle plant) and full plant outages, and users can easily specify different outage durations to investigate, ranging from just a few hours to a full month.

Let’s Review Some Outage Cost Analysis Use-Cases:

Scheduled Maintenance Optimization: Generators need to be taken offline for planned routine maintenance to ensure they continue to operate reliably. Depending on when a generator is taken offline, the asset could incur significant lost revenue. OCA can help asset managers assess the optimal timing for scheduled maintenance to minimize expected lost revenue.

Unscheduled Outage Risk Assessment: These outages can occur due to a range of unexpected events, from technical or mechanical issues at a plant to extreme weather events or natural disasters, such as PG&E’s recent outages due to California wildfires. OCA provides a simulated range of costs from future outages to help understand and manage outage risk.

Outage Insurance Valuation: Some plant managers may consider procuring outage insurance to cover their downside risk due to unplanned outages. While this insurance can provide a tangible benefit in the case of an outage, it can be costly and the benefits can be difficult to value. By assessing outage costs stochastically using market-specific price dynamics, OCA can help price outage insurance and indicate the average monetary benefit it could be expected to provide.

Outage Cost Analysis Conclusion

The Outage Cost Analysis model can easily be integrated into cQuant Analytics Platform modeling workflows. It provides a flexible tool for risk managers to use cQuant’s simulation-based methodology to evaluate outage risk. OCA can be flexibly deployed to serve a number of applications and use cases including maintenance schedule optimization, unplanned outage cost assessment, and complex outage insurance product valuation.

About cQuant.io

cQuant.io is an industry-leading provider of cloud-based energy analytics solutions. cQuant’s advanced analytics platform provides sophisticated energy-focused models across a wide range of industry verticals, from renewable energy project development and contract structuring to thermal generation asset analysis, hedge optimization, and exotic derivative valuation. Visit www.cquant.io for more information.

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