wind integration presentation.ppt · renewable integration model structure flexible requirements...

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Challenges of Renewable IntegrationComparison of Experiences

Presented at:

Presented by:Judy Chang

October 18, 2012

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Contents

♦ Operational and Planning Time Frames of Renewable Integration

♦ Changes in the Ancillary Services Market Design♦ Changes related to the Energy Markets♦ Resource Adequacy and Capacity Market Design ♦ Renewable Integration Model Experience♦ Summary of Renewable Integration Issues and Solutions

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Wind Penetration Has Increased Across North America (and the World)

Source: The Brattle Group analysis

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Summary of Market Fundamentals Generation Capacity Mix (2010)

Source: The Brattle Group analysis

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The Challenges Can Be Defined Across Different Time Frames

Primary Frequency Response

Frequency Regulation

(AGC)

Generation Commitment

and Capacity

Generation and

Transmission Capability

Load-Following/

Energy Blocks

Ancillary Services

Energy

Operations Planning

Resource Adequacy & Procurement

Seconds Months/YearsMinutes Hours Days

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Contents



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California Example: Ramping Requirement Will Provide More Flexibility to Grid Operators

♦ California ISO (CAISO) awards regulation up, spinning reserves and energy simultaneously (based on minimum costs).

♦ However, CAISO lacks sufficient ramping capability and operational flexibility at times.

♦ CAISO uses a “Flexible Ramping Constraint” to ensure sufficient upward ramping flexibility between 15-minute real-time unit commitment and 5-minute real-time dispatch.

♦ CAISO proposes to compensate resources that resolve the Flexible Ramping Constraint the opportunity cost of providing the ramping capability based on the resource’s bids in the ancillary services and energy markets.

♦ CAISO is also working on a new Ramping product.♦ Ultimately, a new ancillary service product may be the efficient

solution

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PJM and ISO New England Examples:With Regulator’s Requests, Some Propose to Pay for Performance for Frequency Regulation

♦ Federal Energy Regulation Commission (FERC) acknowledging that adding renewables onto the grid will increase demand for ancillary services, set policies to encourage “high quality” frequency regulation

♦ Two-part pricing for Regulation service:• Capacity Payment (what most RTOs have today)

■ Compensates resources for setting aside capacity■ Payment uses uniform clearing price per MW based on

marginal resource’s marginal cost, including opportunity cost• Performance Payment (FERC approved PJM’s design)

■ Sum of resources up and down movement in response to a dispatch signal multiplied by a price-per-MW of ACE correction

■ Payment that recognizes contribution to Area Control Error Correction (ACE)

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Westar, Puget Sound, and BPA Examples:Balancing Authorities are Charging Exporting Wind for “Balancing” Service

♦ Puget Sound Energy operates a balancing area with increasing wind resources, both to serve its own native load and for export to California.

♦ Puget proposed a new regulation service for generators selling outside of its control area

• Proposed to set a capacity charge of $12.39/kW-month on exporting wind generators and require them to purchase 16.77% of the generator’s transmission reservation

♦ Westar has proposed a similar type of charge and approved by FERC

♦ BPA charges a balancing charge placed on all exporting wind (current at $1.2/kW-month charge, or ~$4.8/MWh @ 35% capacity factor)

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Contents



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Wind’s Participation Energy Markets Differ by Jurisdictions

Market/JurisdictionCentralized dispatch?

Participation in DA market?

Participation in RT

market?

Is wind dispatchable?

Can wind set market price?

SPP Yes N/A Yes No No

California ISO Yes Yes Yes Not under PIRP* Not under PIRP*

ERCOT Yes Yes Yes Yes (down only)Yes

(when curtailed)

ISO New England YesYes Yes No No

PJM YesYes Yes Yes (down only)

Yes (when curtailed to relieve constraint)

New York ISO YesYes Yes Yes (down only) Yes

Midwest ISO YesYes Yes Yes (down only) Yes

Ontario Yes N/A Yes No No

Australia Yes N/A Yes No No

Source: The Brattle Group analysis * PIRP = CAISO’s Participating Intermittent Resource Program

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U.S. RTO examples:Some Markets Treat Wind as Dispatchable Resources in the Real-Time Energy Market

♦ New York: Wind must participate as a dispatchable resource

♦ Midwest: Wind may participate as dispatchable resource; can change its Forecast Maximum Limit up to which they can be dispatched

♦ PJM: Wind may offer into the RT market as dispatchable resource; can change the maximum limit to which they are dispatched

♦ Texas: Wind generators are dispatchable, but unlike conventional generators, generators must take action only if curtailed; failure to generate within the required range may result in a deviation charge.

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Texas Example:Many Markets Already Experience Negative Prices

♦ In Texas, MISO, and Western PJM, when dispatch cuts into the minimum generation of coal plants, real-time prices tend to turn negative

♦ Some markets will curtail wind before allowing negative prices♦ In response to high incidents of wind curtailment, MISO implemented

Dispatchable Intermittent Resource (DIR) in June 2011, with wind registered as DIR treated as a dispatchable resource in RT energy market.

• DIR is dispatchable by MISO, up to the “Forecast Maximum Limit” based on a short-term wind/output forecasts

• DIRs are subject to the same penalties for deviating from dispatch instructions as other types of generation (including the same tolerance threshold)

• The Forecast Maximum Limit is based on 5-minute interval wind forecast provided by participant, submitted within 30 minutes of the dispatch interval

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Pacific Northwest Example:Coordinated Intra-Hour Scheduling Increases Dispatch Decisions

♦ FERC asks transmission service providers to offer 15-minute interchange transactions to reduce imbalance charges for intermittent resources and load following requirements from the exporting balancing areas

♦ Utilities in the Pacific Northwest, through the Joint Initiative, implemented a coordinated intra-hour transmission scheduling process to:

• Improve access to existing system flexibility• Address unanticipated events • Support the integration of variable energy resources and other system

requirements♦ Intra-hour scheduling allows transmission customers to change

its transmission schedule at the half-hour• No sub-hourly transmission service is being considered currently

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Contents



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Renewable Generation Can Provide Resource Adequacy Benefits – RTOs with Capacity Markets

Methodologies for estimating capacity value differ across markets:♦ PJM:

• For existing wind: 3-year rolling average capacity factors during peak periods• Default value for new wind without operational history = 13%

♦ Midwest ISO: • For existing wind: based on historical capacity factors; for new wind MISO uses an

Expected Load Carrying Capability using a probability based method to estimate system-wide credit

• Currently average system-wide capacity =12.9%; current capacity values range form 0% to 31.8% based on plant and location

♦ New York ISO: • For existing wind: based on resource’s historical capacity factor• Current average ~ 22%

♦ ISO New England: • Based on median historical output during summer and winter peak hours and

shortage events

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Renewable Generation Can Provide Resource Adequacy Benefits – Systems Without Organized Capacity Markets

North American RTOs without centralized capacity market and/or a resource adequacy requirement:♦ SPP: 85th percentile output during a period defined by top

10% of load hours♦ ERCOT: There is no resource adequacy requirement,

although wind is included in capacity reserve margin calculations at 8.7% of nameplate capacity, based on an ELCC estimation

♦ Ontario IESO: No capacity market; in its annual reserve margin calculation, IESO assumes a 13% capacity value at summer peak, and 32% at winter peak

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Expected Load Carrying Capability of Wind Decreases with Penetration Level

Source: NERC IVGTF Workshop, “Methods to Model and Calculate Capacity Contributions of Variable Generation for Resource Adequacy Planning (IVGTF1-2), Milligan & O’Malley, April 2011

Actual contribution to resource adequacy will require many years of historical information, under various conditions

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Calculations of Wind Capacity Values Relies on Three Methods, Each With Its Drawbacks♦ Historical method: based on average resource-level capacity factors

during peak periods:• May be applied only to existing resources with sufficiently long operational

history• Data collection is not subject to a unified set of standards

♦ Exceedance method: based on a pre-determined percentile of historical output levels, with similar drawbacks as above.

♦ Probabilistic method: based on Effective Load Carrying Capability (ELCC):

• Capacity credit levels derived for a class of wind resources, because data to estimate capacity factors of individual new units at sufficiently granular level are scarce and often incomplete.

• Requires many years of wind data to produce robust values (see next slide).♦ Economic reliability simulations: capacity value of intermittent

resources depends on mix of other resources:• For example, capacity value of intermittent resources in higher in systems

with storage and energy-limited generation

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Contents



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Renewable Integration Model Structure

Flexible requirements (regulation, load-following, day-ahead commitment)

Estimate incremental operational requirements

Quantify resource requirements

Estimate fixed and variable costs of

integration

Data Input Output

Mix of resources based cost assumptions

Fixed and variable costs of integration

Calculations

New capacity required to integrate variable

generation

Detailed load & generation profiles

Forecast errors for load & generation

Costs of conventional generation

Installed variable generation

Estimate system’s reliability requirements

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RIM uses CAISO’s definition regulation and load following The CAISO differentiates the two services by the scheduling process and the timing of the forecast

♦ Load following = difference between the hourly schedule (shown as red line) and the 5-minute schedule (blue line) of generation to meet forecast load: the area shaded light blue

♦ Regulation = difference between the 5-minute schedule (blue line) and the actual load/wind (green line): the area shaded red

Source: CAISO Integration of Renewable Resource, November 2007

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Types of Services Needed to Compensate for Variability and Unpredictability

Frequency Regulation♦ RIM uses parameters that describe deviations from relevant scheduling♦ Two primary parameters: intra 5-min volatility and average 5-minute forecast

error (next slide explains) Load following

♦ RIM uses parameter that describe deviations between the 5-minute and the hour-ahead schedules

♦ Two primary parameters: intra-hour volatility and average hour-ahead forecast error

Day-ahead commitment♦ Deviation between day-ahead and hour-ahead schedule

The model uses all 5 statistical parameters shown in diagram

Intra 5-min volatility

5-min forecast error

Intra-hour volatility

Hour-ahead forecast error

Day-ahead forecast error

Regulation Load-following DA Commitment

Minute-by-minute actual 5-minute forecast Hour-ahead forecast Day-ahead forecast

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RIM uses statistical relationships of schedules and actuals to estimate services requirementsRegulation requirement for each 5 minute interval is estimated with two

components of variance of load and generation:1. 5-minute forecast error, PLUS 2. intra-5-minute volatility

Analogous estimation methodology is applied to load-followingDay-ahead commitment need uses forecast error only

5-minute schedule

average actual 5-minute load

Minute-by-minute deviations from 5-

min schedule

5-minute forecast error

intra-5-min volatility

t t+5

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Renewable Integration Studies Have Common Themes While Methodologies and Results Differ

♦ Integration costs are estimated through three primary methods:

• Simulating the incremental operational impact and estimating the associated variable and fixed costs

• Simulating the full system with and without variable wind resources• Using historical resource needs and costs as proxy for future needs

♦ General themes include:• System impacts are driven by the magnitude of generation uncertainty

and variability at different time frames• Renewable integration will

■ Increase the need for flexible resources■ Increase the operational requirements in certain hours

• Addition of renewables displaces conventional thermal resources and can reduce wholesale energy prices (particularly when dispatched as must-run), which in turn can reduce energy market revenues to thermal generators

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The Primary Question: New Resources Required

♦ Estimate the magnitude of resources needed to meet the operational flexibility requirement after renewable resources are added to the system

♦ Estimate the resources needed to meet the reliability requirement of the system

• Load plus planning reserves• Planning reserves are estimated based on gross load• But gross and net load can have significantly different magnitudes

and shapes

♦ Determine if additional resources will be needed above the planning reserve requirements

♦ The requirements around the operational flexibility and reliability requirements should be re-examined for systems with large intermittent resources

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Some Issues Have Not Been Addressed in Integration Studies

♦ Impacts on conventional generation resources:

• Displacement of marginal peaking and cycling generation forces conventional baseload generators to cycle up and down and increases operation and maintenance costs

• Over-generation condition presses conventional baseload generators to operate at inefficient levels, further increasing the fuel and emissions costs

Sources: NREL, Stakeholder Webinar May 19, 2011 WWSIS Phase 2PUC EIM Group Presentation February 10, 2012

♦ Internal transmission congestion might alter the balance of sub-area ancillary service procurement and costs.

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In Summary, Solutions for Integrating Renewable Energy Involve Many Aspects of Changes

♦ Revising rules in both the operations and planning horizons, by changing the way to procure and price services/products

• Frequency regulation, load following and ramping• Allowing and encouraging entry of new technologies and demand resources

♦ Increasing balancing area coordination• Creation of residual energy imbalance market with dynamic interchange schedules• Coordinate intra-hour scheduling across areas• Improve wind forecasting

♦ Improving interconnection and transmission planning processes, in response to high renewables expansion

Ancillary Services

Energy

Operations Planning

Resource Adequacy & Procurement

Seconds Months/YearsMinutes Hours Days

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Additional Reading

Hanser, Madjarov, Katzenstein, and Chang, “Riding the Wave: Using Demand Response for Integrating Intermittent Resources,” Smart Grid: Integrating Renewable, Distributed, & Efficient Energy, Edited by F. Sioshansi, Elsevier 2012.

Chang, Madjarov, Fox-Penner, Hanser, “Policy Challenges Associated with Renewable Energy Integration”, 2011 MIT Energy Initiative Symposium Proceeding on Managing Large-Scale Penetration of Intermittent Renewables, April, 2011.

Madjarov, “Impacts of Changes in Market Rules and Policies on Wind & Solar Integration,” Infocast Wind & Solar Integration Summit, Phoenix, Arizona, January 25, 2011

Chang, “High Wind and Solar Penetration on the Grid” NARUC Renewable Energy Retreat, Riverside, CA, October 7, 2010

Chang and Hanser, “Renewable Integration Model”, California Long-Term Procurement Plan Workshop, Energy Division of the California Public Utilities Commission (CPUC), CPUC Auditorium, San Francisco, August 25, 2010

Hajos, Attila, “Market Impacts of Large Scale Variable Generation,” IEEE PES Summer General Meeting, July 29, 2010

PacifiCorp’s 2010 Wind Integration Resource Study and Appendix, September 1, 2010

Chang, Madjarov, Baldick, Alvarez, Hanser, "Renewable Integration Model and Analysis," Proceedings of the Transmission and Distribution Conference and Exposition, 2010 IEEE Power and Energy Society, April 2010.

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About The Brattle GroupAbout The Brattle Group

We bring institutional expertise in key industry subjects, including finance, resource planning, and regulatory experience:

• Climate Change Policy and Planning• Cost of Capital, Regulatory Finance • Demand Forecasting and Normalization• Demand Response and Energy Efficiency • Electricity Market Modeling• Energy Asset Valuation• Energy Contract Litigation• Environmental Compliance• Fuel and Power Procurement• Incentive Regulation

• Market Design and Competitive Analysis• Mergers and Acquisitions• Rate Design and Cost Allocation• Regulatory Strategy and Litigation Support• Renewables• Resource Planning• Retail Access and Restructuring• Strategic Planning• Transmission Valuation and Risk Management

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About the Author

Judy Chang is an energy economist with background in Electrical Engineering and Public Policy. She has recently worked on regulatory and market issues around the integration of renewable energy, developing analytical tools to assess the potential impact of renewable resources to grid operations and costs to customers, and assessing the effectiveness of various market structure changes to accommodate renewable integration. She has provided expert testimonies before FERC, state agencies, and Canadian authority.

Judy is also leading Brattle’s efforts in strategic planning for utilities. She is leading senior executives and company leadership teams in developing long-term strategic plans through detailed understanding of potential impacts of future industry and regulatory changes. She has led executive teams in developing consensus by jointly addressing regulatory uncertainties in a structured manner.

Judy ChangPrincipal

Cambridge, MA [email protected]

Phone: 617-234-5630

wind integration presentation.ppt · renewable integration model structure flexible requirements...

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