1. In a three-node network, the LMP at node A is $50/MWh; the LMP at node B is $10/MWh and the LMP at node C is $75/MWh. Calculate the total value of the following portfolio of Financial Transmission Rights: - A 10 MW Financial Transmission Right with node B as the source and node C as the sink - A 5 MW Financial Transmission Right with node C as the source and node A as the sink - A 10 MW Financial Transmission Right with node A as the source and node C as the sink In this question, assume that all Financial Transmission Rights are structured as obligations, not options.
2. Assume that the LMP at some location was $50/MWh. Calculate the spark spread for this location assuming a fuel price of $2 per million BTU, a heat rate of 10 million BTU per MWh and O&M costs of $2.50 per MWh.
3. A market participant engaged in virtual bidding takes a long position in the day-ahead market where the LMP is $35 per MWh. In order to close out the virtual position, the market participant takes a short position in the real-time market where the price winds up being $50/MWh. Calculate the profits for this market participant.
4. Suppose that Firm A is located in Philadelphia, and buys 100 MW of power from Firm B, who is located in State College. The contract is bilateral, but all the physical energy is bid into the PJM energy market; thus Firm A winds up paying the Philadelphia LMP for the 100 MW consumed and Firm B receives the State College LMP for the 100 MW produced. Suppose that Firms A and B sign a two-way CFD at a strike price of $30/MWh. Suppose also that Firm B has a 10 MW Financial Transmission Right from State College to Philadelphia (i.e., the source node for the FTR is State College and the sink node is Philadelphia). Show that Firm B's revenues are equal to $3000 and Firm A's costs are equal to $3000.