Not even a decade ago, the electricity (generating) business centered around concepts, such as base-load, system demand, and on-peak and off-peak periods. Financial instruments, such as forward contracts are still a reflection of this, and consist of combinations of the basic building blocks of on-peak and off-peak power. Uncertainty consisted of variability in electricity demand and variability in supply, with the latter being due to tail events, such as unit or transmission line failures. With the proliferation of renewables, the nature of the supply stack has changed drastically. Renewables have zero marginal cost, and hence get dispatched before other generating resources. As wind and solar are intermittent, this introduces a stochastic component at the front end of the supply stack. Today, it is residual demand (= system demand minus wind & solar generation) that the rest of the generation fleet is exposed to. In this talk, I will focus on how the growth of wind and solar has redefined and shaped our modelling and analytics capabilities, and discuss the broader impacts of renewables.
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