NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Market Design for High Penetrations of Wind and

Solar

National Conference of State Legislators

May 29, 2014

Aaron Bloom

Aaron.bloom@nrel.gov

2

Variability

• Variability

o Variations in the output of generators or load

o Observable

o Cannot be reduced through study or measurement

• Everyday examples

o Observed distribution of human height

o Temperature over the course of the day

3

Load, Wind and Solar Variability

• There are many sources of variability, but they differ in magnitude and timing

• There are tools to address these challenges

15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00

MW

Load

Hourly Average Load

0

10

20

30

40

50

60

70

80

90

100

12:00:00 12:05:00 12:10:00 12:15:00 12:20:00

Power (MW)

Actual Wind

Forecasted Wind (schedule)

Average Wind

4

Variability

• Variability tends to get smoother when sources of variability are aggregated o Aggregation of loads from 1950-1990

– Reduced regulation reserve needs

– Reduced load following (ramping) needs

o Aggregation of wind and solar reduces total variability

– Reduces regulation reserve needs

– Reduces ramping

o Historical sources of generation variability do not necessarily decrease with aggregation

5

Uncertainty

• Difference between forecast and actual

• The removal from service availability of a generating unit, transmission line, or other facility for emergency reasons

• Occur for renewable technologies as well as conventional

• However the concentration of conventional resources makes the impact larger, ie. one large plant or transmission element

Forecast Errors Forced Outages

Source: Hodge et al. 2012, A Comparison of Wind Power and Load Forecasting Error Distributions, http://www.nrel.gov/docs/fy12osti/54384.pdf

Note difference in scale between graphs!

6

Managing Variability and Uncertainty

• Policies o Coordination and

Collaboration o Open Access Transmission

Tariffs

• Operational Practices o Unit Commitment o Economic Dispatch o Sub-hourly markets

• Reserve Products o Regulation Reserves o Contingency Reserves

• Financial Rules o Market settlement o Hedges

Source: MISO Markets Training

Source: http://www1.eere.energy.gov/solar/pdfs/50060.pdf

Variable Generation and the Future of Market Design

8

High VG and Electricity Markets

• RTO market participant payment sources

o Bilaterals – Negotiated transactions between known parties, can include fixed and variable costs

o Capacity market – Auction to provide resource adequacy and fixed cost recovery

o Energy market – Day-ahead and real-time auctions that optimize day-ahead scheduling and real-time dispatch

based on bid in costs

o Ancillary Service market – functions performed by electric generating, transmission, and system-control equipment to

support the reliability of the transmission system

Bilateral Agreements Capacity Market Energy Market Ancillary Services

Other Revenue

9

Potential Impacts of Wind and Solar

• Energy Markets o Depressed energy prices because of low variable costs for

wind and solar, ie. no fuel costs o Increased price volatility o Increased need for flexible resources o Decrease revenue for conventional generation

• Ancillary Services Markets o May increase operating reserve needs o Asynchronous nature may create additional need for

frequency response

• Capacity Markets o Increase importance of capacity markets for capital cost

recovery

10

Actively Discussed Solutions

• FERC Order 755 o Reforms to compensation for regulating reserves

• Non-traditional resources o Demand response and FERC Order 745

• Flexible Capacity Procurement o Flexibility requirements in capacity markets

• Flexible Ramping Products o New Ancillary Services for operations

• Sub-hourly settlement o Financial practice that impacts operations

• Multi-period scheduling o Short term operational price forecasting

11

NREL Research: Active Power Controls

• Electrical frequency – Interconnection balance of supply and demand.

• Frequency response decline

• Emergence of electronically-coupled new technologies without PFR capabilities

• Current markets include disincentives

0 s typically,

5 - 10 s

typically,

20 - 30 s

typically,

5 – 10 min

Initial slope of decline is

determined by system

inertia (or cumulative

inertial response of all

generation)

Primary Freq. Control AGC

12

NREL Research: Active Power Controls

• Lack of incentives might be leading cause to frequency response declines (not caused by renewables) o Ancillary service market might be

logical next step with new BAL-003

• Higher penetrations of renewables may limit ability to respond to such events o Could incentivize wind resources

to install primary frequency response capabilities

• Wind capabilities to provide active power controls are very good!

Source: Ela, E; et al. “Active Power Controls from Wind Power: Bridging the Gaps”, NREL Publication ID: NREL/TP-5D00-60574 http://www.nrel.gov/docs/fy14osti/60574.pdf

13

NREL Research: Flexibility Market Design

Milligan, Kirby, King, Beuning (2011), The Impact of Alternative Dispatch Intervals on Operating Reserve Requirements for Variable Generation. Presented at 10th International Workshop on Large-Scale Integration of Wind (and Solar) Power into Power Systems, Aarhus, Denmark. October

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Footprint Regional BAU

Aver

age

Tota

l Reg

ulat

ion

(MW

)Average Total Regulation for 6 Dispatch/Lead Schedules by Aggegation (Dispatch interval -

Forecast lead time)

10-10

30-10

30-30

60-10

30-40

60-40

Faster Faster Faster

Large Medium Small

14

NREL Research: Flexibility Market Design

• There may be several ways to incentivize flexibility

o Single period SCED, Multi-period SCED, Flexiramp

• Financial Settlement rules may incentivize flexibility

Ela, E.; Milligan, M.; et al., “Electricity Market Design with High Levels of Variable Generation” NREL publication ID: NREL/TP-5D00-61765

Total Revenue Total Cost Total Profit (Total Revenue

minus Total Cost)

Five-minute

settlements

Hourly

average

settlements

Five-minute

settlements

Hourly

average

settlements

Scenario 1 $15,208 $13,338 $10,895 $4,313 $2,443

Scenario 2 $17,479 $17,441 $13,373 $4,106 $4,068

Scenario 3 $17,134 $17,134 $13,053 $4,081 $4,081

15

References and Contact

• Forthcoming Paper o Ela, E.; Milligan, M.; et al., “Electricity Market Design with High Levels of

Variable Generation” NREL publication ID: NREL/TP-5D00-61765

• Credits o Ela, E; et al. “Active Power Controls from Wind Power: Bridging the Gaps”,

NREL Publication ID: NREL/TP-5D00-60574 http://www.nrel.gov/docs/fy14osti/60574.pdf

o Markets to Facilitate Wind and Solar Energy Integration in the Bulk Power Supply – An IEA Task 25 Collaboration. http://www.nrel.gov/docs/fy12osti/56212.pdf

o Ela, E.; O'Malley, M., "Studying the Variability and Uncertainty Impacts of Variable Generation at Multiple Timescales," IEEE Transactions on Power Systems, vol.27, no.3, pp.1324-1333, Aug. 2012

o Ela, Milligan, O’Malley (2011), A Flexible Power System Operations Simulation Model for Assessing Wind Integration. http://www.nrel.gov/docs/fy11osti/50641.pdf

• Contact o aaron.bloom@nrel.gov