regulatory dimensions to renewable energy€¦ · • priority areas of u.s. experience with...

This publication is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the National Association of Regulatory Utility Commissioners (NARUC) and do not necessarily reflect the views of USAID or the United States Government

REGULATORY DIMENSIONS TO RENEWABLE ENERGY FORECASTING, SCHEDULING, AND BALANCING IN INDIA REGULATORY PRACTICES ANALYSIS AND PRIMER

INDIA ELECTRICITY REGULATORY PARTNERSHIP Under Greening the Grid (GTG) Program A Joint Initiative by USAID and Ministry of Power

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REGULATORY DIMENSIONS TO RENEWABLE ENERGY FORECASTING, SCHEDULING, AND BALANCING IN INDIA: REGULATORY PRACTICES ANALYSIS AND PRIMER Project Title: India Energy Regulatory Partnership under Greening the Grid

Program Sponsoring USAID Office: USAID/India Cooperative Agreement #: AID-EEP-A-00-09-0001-00 Implementing Partner: National Association of Regulatory Utility Commissioners

(NARUC) Team: Lakshmi Alagappan and Fredrich Kahrl from Energy and

Environmental Economics, Inc; Rajit Bhavarikar, Regulatory Assistance Program; and Crissy Godfrey, NARUC

Note:ThePrimerhasbeendevelopedundertheIndiaRegulatoryPartnershipundertheGreeningtheGridProgram,ajointinitiativebetweenUSAIDandMinistryofPower.ThisprimerdocumentsthepracticesfollowedinIndia,withspecificfocusontwostates,onREforecasting,schedulingandbalancingofrenewableenergyandpresentspracticesfollowedinU.S.withparticularfocusontheWesternUnitedStates.ThedocumentcollatesfeedbackfromkeystakeholdersandisintendedtocreateafruitfuldialogueonhowU.S.practicesmayberelatabletotheIndiancontext.ItcanbeviewedasaworkingdocumenttosupportsubsequentactivitiesunderGreeningtheGrid,includingaguidelinesdocumentandpilots.Thisdocumentisnotintendedtobeanimplementationplan.

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Contents1 Forecasting,Scheduling,andBalancingofRenewableEnergy:OverviewandRegulatoryDimensions .............................................................................................................................................................6

1.1 OperationalChallenges................................................................................................................7

1.2 RegulatoryDimensions..............................................................................................................11

2 Forecasting,Scheduling,andBalancingofRenewableEnergyinIndia.............................................14

2.1 InterstateRegulationsandPractice...........................................................................................14

2.2 IntrastateRegulationsandPractice...........................................................................................17

2.2.1 StateModelRegulations....................................................................................................17

2.2.2 RajasthanRegulationsandCurrentPractices....................................................................18

2.2.3 TamilNaduRegulationsandCurrentPractices..................................................................20

2.3 PriorityAreasforRenewableIntegration..................................................................................24

2.3.1 EnablingEconomicDispatch..............................................................................................24

2.3.2 EnablingGreaterRegionalCoordination...........................................................................25

2.3.3 IncreasingResourceFlexibility...........................................................................................26

2.3.4 ClarifyingRolesandResponsibilities,andAuthority..........................................................26

3 U.S.ExperiencewithForecasting,Scheduling,andBalancingofRenewableEnergy........................28

3.1 Background................................................................................................................................28

3.1.1 Ownership,Regulation,andIndustryStructure................................................................28

3.1.2 DescriptionofCaseStudyAreas........................................................................................31

3.2 U.S.Experience..........................................................................................................................32

3.2.1 EnablingEconomicDispatch..............................................................................................32

3.2.2 EnablingGreaterRegionalCoordination...........................................................................40

3.2.3 IncreasingResourceFlexibility...........................................................................................49

3.2.4 ClarifyingRoles,Responsibilities,andAuthority................................................................55

4 PriorityAreasofU.S.ExperiencewithRelevanceforIndia...............................................................60

4.1 KeyInsightsfromtheU.S...........................................................................................................61

4.1.1 InsightsandConsiderationsforRegionalCoordinationinIndia........................................61

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4.1.2 InsightsandConsiderationsforIntegrationofLargeScaleRenewablesinIndia..............62

4.2 ImplementationConsiderations,UsingIllustrativeExampleofJointDispatch........................63

4.3 DesignConsiderations...............................................................................................................66

Area...........................................................................................................................................................66

5 References.........................................................................................................................................67

6 Appendix:BackgroundonIndia’sElectricitySector,RenewableEnergyGoals,andInterstateRegulations................................................................................................................................................72

6.1 OrganizationofIndia’sElectricitySector...................................................................................72

6.2 RenewableEnergyDevelopmentinIndia..................................................................................74

6.3 InterstateRegulationsforForecasting,Scheduling,andBalancingofRenewableEnergy........77

6.3.1 FrameworkforRenewableGeneration.............................................................................77

6.3.2 FrameworkforNon-RenewableResources.......................................................................80

6.4 StateModelRegulations............................................................................................................84

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Acknowledgements

Thepurposeofthisreportistounderstandtheregulatorydimensionstorenewableenergyforecasting,scheduling,andbalancinginIndia’spowergrid.ThisworkisconductedunderUnitedStatesAgencyforInternational Development (USAID)'s Greening the Grid program, which is a multi-year initiativeimplementedinpartnershipwithMinistryofPower,GovernmentofIndia.

We thank the multiple stakeholders that generously gave their time towards the field interviewsconducted as part of this study, including Ms. Shubha Sarma and Dr. S. Chatterjee of the CentralElectricityRegulatoryCommission;Mr.S.K.Soonee,Mr.K.V.S.BabaandtheircolleaguesfromPOSOCO;Mr.PankajBatraofCentralElectricityAuthority;Ms.AuxiliamJayamary,Director(Operations),andhercolleaguesfromTNSLDC,andMr.AkshayaKumar,Chairperson,andhiscolleaguesfromTNERC;Mr.V.Hiremath, Chairperson, and his colleagues at RERC; Mr. Sanjay Mathur and his colleagues fromRajasthanSLDC;Mr.BannaLal,ManagingDirectorandhiscolleaguesatRUVNL;Mr.B.B.Mehta,ChiefEngineer of Gujarat State Load Dispatch Center; and numerous other stakeholders. We alsoacknowledgetheactiveparticipationofDr.S.ChatterjeeoftheCentralElectricityRegulatoryAuthorityandMr.S.K.SooneeofPOSOCOforprovidingwrittencommentsonearlierdraftsofthisreport.Lastly,wethankMs.JyotiArora,JointSecretary,MinistryofPowerforprovidingactiveleadershiponGreeningtheGridandforleadingtheIndiandelegationtotheU.S.thathelpedshapetheprimer.

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RegulatoryDimensionstoRenewableEnergyForecasting,Scheduling,andBalancinginIndia

Forecasting,scheduling,andbalancingarethe foundation forhigherpenetrationrenewableelectricitysystems.Together,theyconstitutethecoreprocessesthroughwhichvariablerenewablegeneration—wind, solar, and run-of-river hydroelectric— is transmitted over the electricity grid and delivered toconsumers.Althoughforecasting,scheduling,andbalancingareoftenthoughttobe largelywithinthesphereofelectricitysystemoperations,theyalsohaveimportantregulatorydimensions.

In India, rapid growth in renewable electricity generation has required the recent development ofregulatory frameworks that govern renewable energy forecasting, scheduling, and balancing. Theseframeworks will need to continue to evolve to meet emerging challenges associated with meetingIndia’s2022renewableenergygoals.1

Manyemerging regulatory challenges in Indiahaveparallels in theUnited States, due, inpart, to thefederalist tradition in both countries. U.S. experience in integrating renewable energy could providevaluableinsightsforIndia,andviceversa.

ThisprimerprovidesaU.S.perspectiveonpriorityareasforimprovingtheforecasting,scheduling,andbalancingof renewable energy in India.2Basedon a reviewof regulatorydocuments andpractices, itidentifiesfourpriorityareas:

• Enablingeconomicdispatch—policyandregulatoryframeworksthatenableleast-costdispatchof all generation, including variable renewable generation, as a strategy for economicallymanagingrenewableenergycurtailment;

• Enabling greater regional coordination — open access regulations and cooperativearrangements that reducebarriers to trade in renewablegenerationamongstatesandenablegreatercoordinationindispatchamongstates;

• Increasing resource flexibility — new incentive designs that increase the flexibility of coalgenerationunitsandloads;

• Clarifying roles, responsibilities, and authority — allocation of roles, responsibilities, andauthorityinIndia’sevolvingnationalelectricitysystem.

1Thisprimerfocusesonthesubsetofrenewableenergydevelopmentquestionsrelatedtogridintegrationandpowersystemoperations.Foradiscussionofissuesassociatedwithoverallpolicysupport,incentivedesign,projectfinanceanddevelopment,andpowersystemplanning,seeMoP(2016),NITIAayogetal.(2015),GIZ-India(2015).2Theprimerfocusesonthehighvoltage(“bulk”)transmissionsystem;itdoesnotcoverintegrationchallengesatthedistributionsystemlevel.

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Ineachofthesefourareas,theprimerdescribeskeyelementsofU.S.regulatoryexperiencethatmayberelevant for the transition to higher penetrations of renewable energy in India. It seeks to provide areference on potential nearer- and longer-term solutions to emerging challenges for a regulatoryaudienceinIndia.

Theprimerisorganizedintofoursections.

• Forecasting, Scheduling, and Balancing of Renewable Energy: Overview and RegulatoryDimensions provides a brief overview of the operational challenges created by variablerenewablegeneration. Itexamines the intersectionbetween theseoperational challengesandtheregulatoryquestionstheypresent,suchasopenaccesstothegridandregionalcoordinationinoperations.

• Forecasting, Scheduling, and Balancing of Renewable Energy in India examines evolvingregulatory frameworks for forecasting, scheduling, and balancing renewable energy in India,bothatacentralgovernment(interstate)levelandatastate(intrastate)levelinRajasthanandTamilNadu.Drawingon a reviewof regulatory documents anddiscussions and interviews,3itidentifies key successes thus far and emerging areas of challenges to renewable energyintegrationinIndia.

• U.S. Experiencewith Forecasting, Scheduling, and Balancing of Renewable EnergydescribeslessonsfromU.S.experience ineachemergingchallengeareathatcouldberelevantfor India,drawingoncasestudiesfromCalifornia,Colorado,andOregon.

• Priority Areas of U.S. Experiencewith Relevance for India identifiesareasofU.S. experiencethatareparticularlyrelevanttoanIndiancontext,describeswhyandhowtheyarerelevant,andidentifiesareastoexploreinfurtherdetail.Thissectionwillbecompletedinearly2017.

An Appendix provides background on the organization of India’s electricity sector, renewable energygoals,andamoredetaileddescriptionofinterstateandintrastateregulatorydocuments.

1 Forecasting,Scheduling,andBalancingofRenewableEnergy:OverviewandRegulatoryDimensions

Forecasting,scheduling,andbalancingformthecoreofgridoperations—howtheelectricgridisoperatedtoensurethatelectricitysupplyanddemandremainconstantlyinbalance.Byshapinghowrenewablegeneratorsareintegratedintogridoperations,thesethreeprocessesarecriticalindeterminingwhetherrenewablegenerationcanbeintegratedreliablyandatlowcost.Additionally,by

3ThesectiononintrastateregulationsisbasedonconversationswithelectricitysystemregulatorsandoperatorsinbothRajasthanandTamilNaduthroughanintensiveweek-longstudytourinAugust2016.WewouldliketothankthosethatwespokewithattheRajasthanElectricityRegulatoryCommission(RERC),RajasthanStateLoadDispatchCenter(RSLDC),RajasthanDiscomsPowerProcurementCenter(RDPPC),TamilNaduElectricityRegulatoryCommission(TNERC),TamilNaduStateLoadDispatchCenter(TNSLDC),TamilNaduElectricityBoard(TNEB),andNationalInstituteofWindEnergy(NIWE)fortheirtimeandcontinuedeffortinhelpingtoshapethisprimer.

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determiningrevenuesandcoststorenewablegenerators,theyinfluencethefinancingofrenewableenergyprojectsandthusshapethefuturedevelopmentofrenewableenergyresources.

Thissectionprovidesanoverviewofthechallengesthatrenewablegenerationcreatesforgridoperations,aswellastheregulatorydimensionstothesechallenges.Thediscussioninthissectionprovidesageneralframeworkfortherestoftheprimer.

1.1 OperationalChallengesHistorically,themainchallengetomaintainingconstantbalancebetweenelectricitysupplyanddemandinallpowersystemswastheinherentvariabilityanduncertaintyindemandandtheunplannedoutageofgeneratorsandtransmissionequipment.Toaddressthischallenge,gridoperatorsscheduledgenerationandtransmissioncapacitytomeetthenextday’sforecasteddemandandeitherheldadditionalgenerationcapacityinreserveto“follow”changesindemandandmitigatepotentialshortfallsinsupply,ordisruptedserviceto(“curtailed”)customerswhendemandexceededsupply.

Risingpenetrationsofrenewablegeneration—andinparticularsolarandwindgeneration—insomeelectricity systems are creatingnew challenges for systemoperators, even as “traditional” challengesremain(Figure1).Theoperatingchallengescreatedbytheseresourcesareincreasinglywellunderstood.Solar and wind generation more closely resemble electricity demand than conventional thermal,hydropower,ornucleargeneration.Likedemand,solarandwindresourcesareinherentlyvariableanduncertain,andforecastsoftheiroutputimprovesignificantlyclosertoreal-time.Aggregatingsolarandwindresourcesoverlargergeographicareastendstoreduceboththeirvariabilityandforecasterror.4

4Formoreonthebenefitsofalargergeographicareaforbalancingsolarandwindvariabilityanduncertainty,seeParsonsetal.(2006),MilliganandKirby(2007),GEEnergy(2010),Milliganetal.(2010),EnerNexCorporation(2011),andMaietal.(2012).

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Figure1.OperatingChallengesforConventionalandHighRenewableElectricitySystems

To better integrate solar and wind generation into grid operations, many grid operators haveestablished solar and wind forecasts and have begun to integrate them into their overall process ofscheduling and dispatching generators to meet electricity demand. In practice, integrating solar andwind generation onto the grid has meant using thermal and hydroelectric resources to balance thevariabilityanduncertaintyinnetload—loadminuswind,solar,andrun-of-riverhydropower.

Thedistinctionbetweenschedulingandbalancingisoftenambiguousandcontextspecific.Inthisprimer,we define ‘scheduling’ as the process of arranging and rearranging generators to meet forecastedelectricity demand, and ‘balancing’ as the process of re-dispatching generators once schedules areconsidered fixed. For conventional generators, this fixing of schedules typically corresponds to gateclosure in intraday markets. For variable renewable generation — wind, solar, and run-of-riverhydropower—forecastsareusedtosetschedules.Forecastsoftenextendacrossgateclosure(Figure2).

Conven@onalElectricitySystem

Loadforecasterrorandunplannedoutagesof

generatorsandtransmissionlines

HighRenewableElectricitySystem

Variabilityanduncertaintyinrenewablegenerajon,loadforecasterror,andunplannedoutagesof

generatorsandtransmissionlines

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Figure2.IllustrationoftheTimescalesofForecasting,Scheduling,andBalancingofVariableRenewableGeneration(VRG)andConventionalGeneration(CG)

In engineering-economic terms, economic (merit order) dispatch of variable renewable generationimplies that systemoperatorswill dispatch its availablegenerationwheneverpossible,because ithasvery low marginal costs. From a societal perspective, economic dispatch of variable renewablegeneration will minimize total electricity system costs and maximize the societal value of theseresources.

Inpractice,risingpenetrationsofvariablerenewablegenerationwillbegintocreate localandsystem-wide grid congestion — in this case, when generator schedules exceed local demand plus exportcapability5—ondayswithhighsolarorwindgenerationandlowdemandorifgeneratorschedulesaretoorigid.Aswithconventionalcongestion,whenfacedwiththissituationsystemoperatorswillneedtocurtail generator schedules to avoid overgeneration conditions (Figure 3). Regulators and systemoperators are increasingly exploring economic approaches to managing renewable energy-relatedcongestion,inwaysthatminimizecoststocustomersandprovidevaluetoproducers.

5Technically,amoreprecisedefinitionofcongestioniswhenrequestedgeneratorschedulesexceedavailabletransfercapabilityoveragivenpath,butthesedefinitionsareequivalentinthiscase.

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Figure3.ForecastedCurtailmentofRenewableEnergyonaHighRenewable,LowLoadDayinCaliforniain2030(50%RenewablePenetration,StatusQuoOperatingParadigm)6

Some amount of curtailment, or “dispatch,” of variable renewable generation is likely to beeconomicallyefficient. Increasingly, interconnectionstandards forvariable renewablegeneratorshavehigher requirements for dispatchability and provision of ancillary services. However, high levels ofcurtailmentareunlikelytobeefficientandwilldiscouragerenewablegenerationinvestment.

Approaches todeterminingeconomic levels of variable renewable generation curtailment vary acrosselectricity systems and regulatory contexts. To the extent that curtailment is uneconomic, or isundesirablefromapublicpolicyperspective,therearegenerallytwoapproachestoreducingit:

1) Increasetheflexibilityoftheexistingelectricitysystem,through:- Changes in grid codes, operating processes, dispatch time intervals, regulations, and

marketdesigns;- Encouraging portfolio diversity in renewable resources (wind, solar, hydropower,

geothermal)andspatialdiversityinthelocationofrenewableresources;- Changes in pricing that encourage consumption during periods of high renewable

generation;- Expandingbalancingareas.

2) Investinnewresourcesthatincreaseelectricitysystemflexibility,including:

- Demandresponsetechnologies;- Energystorage;

6“Statusquooperatingparadigm”herereferstotheCaliforniaIndependentSystemOperatorasasingle-statebalancingauthorityusingpre-existingmarketrulesandexpectationsforminimumthermalgenerationlevels.FigureisfromE3(2016).

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- Newtransmission;- Newflexiblegeneration.

Among these options, increasing the flexibility of the existing electricity system through changes inforecasting, scheduling, and balancing processes tends to be less expensive than investing in newresources. Inmost cases, however, these changes require an enabling regulatory framework and theneedtodealwithamorecomplexsetofpoliticaleconomyandinstitutionalchallenges.

1.2 RegulatoryDimensionsRegulatoryquestionsaroundtheforecasting,scheduling,andbalancingofrenewableenergyconcerntheallocationofbenefits,costs,andrisksalongtheelectricitysupplychain—amongindependentgenerators,betweenindependentgeneratorsandloadservingentities(LSEs),andbetweenLSEsandcustomers.Althoughtheseallocationquestionsfocusontheshort-runoperationofthepowersystem,theyhaveimportantimplicationsforlonger-termcontractsandprocurementandinvestmentdecisions.

Themetricsthatregulatorsusetoevaluateregulatorydesignandregulatorychangeoftendifferacrosscountriesandbetweendifferentlevelsofgovernment.Inthisprimer,wetakeaU.S.perspectiveonevaluativemetrics,combiningstateandfederalmetrics(Figure4).Thatis,changesinregulationtosupportintegrationofrenewableenergyarebeneficialiftheyincreasethechanceofmeetingrenewableenergygoals,increaseormaintainreliability,reducecostsandrisksforcustomers,arefairandreasoned,andcreateasupportinginvestmentenvironment.WeusethisperspectivetoidentifyemergingchallengesintheIndiancontextinSection2,andindescribingU.S.experienceinSection3.

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Figure4.KeyMetricsusedbyU.S.StateandFederalElectricityRegulatorsforEvaluatingRegulatoryDesignandChange7

Increasinglydiverseownershipofrenewablegenerationcomplicatestheregulatoryquestionsassociatedwithforecasting,scheduling,andbalancingofrenewableenergy.Inmanycountries,includingIndia,theU.S.,andpartsofEurope,renewablegenerationisprimarilyownedbyindependentpowerproducers.Thiscancreateconflictswithincumbentutilitiesandraisesquestionsoverhowtoensurefairandnon-discriminatoryaccesstothegridfortheseproducers.Forinstance,systemoperatorsmaycurtailrenewablegenerationinwaysthatareconsistentwithutilityincentivesorexistingcontractualarrangementsbutarenotsocietallybeneficial.Creatingtheinstitutionstoencouragesocietallyeconomiccurtailmentofrenewableenergyisprincipallyaregulatoryproblem.

Inthecontextofmorediversegenerationownership,theregulator’staskistoaddressstakeholderconcernsandreconcilecompetinginterestsinfourareas(Table1):(1)theallocationofforecastingcostsandforecasterrorpenaltiesforrenewablegeneration;(2)operatingcostsforconventionalgeneration;(3)investmentcostsandcontractsforgenerationandtransmission;and(4)changesincoststhatresultfromgreatercoordinationamongbalancingareas.

7“Rates”intheU.S.referstotariffsandprices.Thischaracterizationdoesnotexplicitlyincludetheperspectiveofenvironmentalregulators.

States(Intrastate)Costandrisktoratepayers

ReliabilityPublicpolicygoals

Investmentenvironment

Federal(Interstate)Justandreasonablerates

Prevenjngunduediscriminajonandpreference

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Table1.DifferentStakeholders’CostandRiskConcerns

Renewablegenerators

Thermalgenerators

Hydrogenerators

UtilityorLSE Customer

Forecasting Forecasterrorpenalty,forecastingcosts

Higherprices

Operating Cyclingandrampingcosts

Higherprices,reliability

Investment Curtailmentcosts**

Decliningutilization,lowerprices,opportunitycosts*

Opportunitycosts*

Contractrisk,obligations***

Higherprices

Regionalcoordination

Decliningutilization

Contractrisk,Obligations***

Higherprices,reliability

*Opportunitycostreferstothecostofmissinghighmarketpricehoursorofhavingtoreplacelowercostgenerationwithmoreexpensivegeneration.**Curtailmentcostsforrenewablegeneratorsincludestheopportunitycostofcurtailmentrelatedtoovergenerationandprovisionof“essentialreliabilityservices”(rampingcapability,frequencycontrol,voltagecontrol).8***Obligationsherereferstoregulatoryrequirementstoinstallorprocurerenewablegeneration.

Renewablegeneratorsseektobalanceforecasterrorpenaltiesandforecastingcosts,whilereducingcurtailment.Thermalgenerators,ortheirutilityowners,typicallyrequireincentivestooperatemoreflexibly,andmaybeconcernedwithdecliningplantutilization.UtilitiesandLSEsmaybeconcernedoverpotentialcontractriskswithrenewableandnon-renewablegenerators,andtheirabilitytomeetregulatoryobligationsforrenewableenergyifrenewablegenerationfaceshighcurtailment.Customerswillbeconcernedoverpotentialpriceincreasesandpotentialdecreasesinreliability.Greatercoordinationacrossbalancingareasmayimprovepolicyoutcomesforrenewableenergydeployment,butmayhavedistributionalimpacts.

Reconcilingtheseconcernsrequiresfindingwaysto:

• discovereconomiclevelsofrenewableenergycurtailment;• alignutilityandLSEincentiveswithrenewableenergygoals;• reasonablycompensatethermalgeneratorsforcyclingandrampingcostsandlowerutilization,

suchasthroughwholesalemarketpricesoronacostbasis;and• minimizepriceimpactsorevenreducepricesforallcustomers.

8ThiscategorizationisfromNERC(2015).Formoreonusingrenewableenergytoprovidetheseservices,seeLoutan(2016).

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Inhigherpenetrationrenewableelectricitysystems,theessentialbalancethatregulatorsmusttrytofindisbetween:(1)curtailmentofvariablerenewablegenerationandthecontractualandmarketrisksthatitcreatesforrenewablegeneration,ontheonehand;and(2)increasesinelectricitysystemcoststhatresultfromreducingvariablerenewablegenerationcurtailment,ontheother.Instrikingthisbalance,regulatorychangestoimproveforecasting,scheduling,andbalancingarealowhangingfruit,andmayevenpaydividendsbyaddressingotherinefficienciesandreducingsystemcosts.

2 Forecasting,Scheduling,andBalancingofRenewableEnergyinIndiaRegulatoryframeworksandpracticesforforecasting,scheduling,andbalancingofrenewableenergyinIndiahaveevolvedsignificantlyoverthepastfiveyears.ThissectiondescribescurrentregulationsandpracticeataninterstatelevelandatanintrastatelevelinRajasthanandTamilNadu.Basedontheseaccounts,itthenassessessuccessesthusfarandprioritychallengeareasgoingforward.

2.1 InterstateRegulationsandPracticeThissectionprovidesabriefoverviewoffourregulatorydocumentsthatcomprisethecoreinterstateregulatoryframeworkaffectingrenewableenergyintegration.Thesefourdocumentsinclude:

• FrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources;

• DeviationSettlementMechanismandRelatedMatters;• AncillaryServicesOperationsRegulation;and• OpenAccessinInter-stateTransmissionRegulations.

AmoredetaileddescriptionofthesedocumentsisprovidedintheAppendix.

FrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources.TheCentralElectricityRegulatoryCommission(CERC)finalizedtheFrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources(“Framework”)inAugust2015,asasuccessortotheproposedRenewableRegulatoryFund(RRF).TheFrameworkcreatedaforecastingandschedulingprocedureforwindandsolargenerationandasystemofimbalancechargesforinterstaterenewablegenerators.

Specifically,theFrameworkrequiresinterstatewindandsolargeneratorstosubmitforecastedschedulesforthefollowingday,oracceptadefaultforecastbytheRegionalLoadDispatchCenter(RLDC).Onthedayof,generatorsareallowedtorevisetheirschedulesupto16times,witheachrevisioncorrespondingtoaone-and-a-half-hourtimeblockandrevisionstakingeffectonehour(4timeblocks)aftertheyaremade.Generatorsarepaidtheirpowerpurchaseagreement(PPA)priceforscheduledgeneration,andpayanimbalancechargefordeviationsfromschedule.Deviationchargesaretieredforabsoluteforecasterrorsthatexceed15%ofavailablecapacity,andareasymmetric,withhigherchargesforunder-forecasts(Figure5).

UndertheFramework,renewableenergycredits(RECs)tomeetstaterenewablepurchaseobligations(RPOs)areallocatedbasedonscheduledratherthanactualgeneration.TheRECimplicationsofdifferencesbetweenscheduledandactualrenewableenergygenerationaremanagedbytheNational

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LoadDispatchCenter(NLDC),whichsellsandpurchasesRECsthroughitsimbalancepooltoensurethatinterstateRECsmatchactualinterstaterenewablegeneration.

Figure5.TieredImbalanceCharges(PaymentsandPenalties)forWindandSolarGeneratorsundertheFramework

DeviationSettlementMechanismandRelatedMatters.Thedeviationsettlementmechanism(DSM)grewoutofandreplacedtheavailabilitybasedtariff’s(ABT’s)unscheduledinterchange(UI)mechanismin2014.UndertheDSM,loadservingentitiesarechargedfordeviationsfromrequestedday-aheadschedulesforinterstategeneration,andinterstategenerators(excludingwindandsolar)arechargedfordeviationsfromcommittedday-aheadschedules.Becausetheschedulingandbalancingofnon-renewablegenerationaffectsthebalancingofrenewableenergy,theDSMisrelevanttothediscussioninthisprimer.

TheDSMusesatwo-partstructure,withafrequency-basedimbalancechargebasedonproxyincrementalenergycostsandatieredadditionaldeviationchargebasedonover-withdrawals(loads)orunder-injections(generators)thatexceed150MWor12%ofschedule,whicheverislower(Figure6).DSMchargesonover-withdrawalsmaybeonlyindirectlytiedtointerstategenerationschedules—theinterstatesystemeffectivelyactsasanationalbalancingmechanismforanystateimbalances.

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Figure6.Frequency-BasedImbalanceChargeandTiersforAdditionalDeviationChargeundertheDSM9

Thresholdsforadditionaldeviationcharges(“DSMlimits”)—themaximumlimitbeforepenaltiesbegintobeimposed—effectivelyactasanintradayimportlimitonstates.In2016,CERCloosenedtheselimitsforrenewablerichstatesuntilApril2017.Stateswith1,000MWto3,000MWofsolarandwindcapacityareallowedaDSMlimitof200MW;stateswithgreaterthan3,000MWofsolarandwindcapacityareallowedalimitof250MW.10

AncillaryServicesOperationsRegulation.Before2016,theDSMfunctionedasadecentralizedmechanismtoaddressinterstateload-generationimbalancesonalltimescales.CERC’s2016AncillaryServicesOperationsRegulationprovidesaframeworkfortheNLDCtocentrallydispatchinterstategeneratingunitsthroughtheRLDCsforthepurposeofmaintaininggridfrequency.Theframeworkalsoincludesamechanismtocompensateinterstategeneratorsforprovidingthisservice.Inpractice,theNLDCcreatesameritorderstack(basedonvariablecost)ofinterstategeneratingunitsthathavecapabilitytoprovideancillaryservicesineithertheupwardordownwarddirection.Theunitsarecalleduponforancillaryservicedispatchwhentherearesystemtriggers,suchasextremeweather,generatororlineoutages,orincreasingareacontrolerror.Toensureunitsarenotpenalizedfordeviatingfromtheirdayaheadschedules,unitsthataredispatchedforancillaryservicesareonlyassessedforDSMfordeviationsontheirdayaheadschedulesadjustedbytheirancillaryserviceschedules.

OpenAccessinInter-stateTransmissionRegulations.CERC’s2004OpenAccessregulationsgovernaccesstothebulktransmissionsystemforindependentgeneratorsanddirectaccesscustomers.Theregulationscreated,interalia,areservationsystemforshort-term(lessthan1year)andlong-term(greaterthan25years)transmissioncustomers,anauctionmechanismforallocatingcapacityintheeventthatrequestsforshort-termtransmissioncapacityexceedavailablecapacity,andasystemofcurtailmentprioritywherelong-termtransmissioncustomershavepriorityovershort-termcustomers

9ThepricepointsandtiersareexplainedingreaterdetailintheAppendix.10Statesarguedthattheselooserlimitswereneededtoaddresshigherrenewableenergypenetrations,thoughaPOSOCOstudyindicateddeviationswereprimarilyresultingfromloadforecasterror,ratherthanrenewableenergy.CERC(2016).

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withineachserviceclassandarecurtailedonaproratabasisduringcongestionevents.In2016,CERCexemptedinterstatewindandsolargeneratorsfromtransmissionaccessandlosscharges.11

2.2 IntrastateRegulationsandPracticeThissectiondescribestheintrastateregulatoryframeworkforforecasting,scheduling,andbalancingrenewableenergy,withafocusontwostates:RajasthanandTamilNadu.Thesetwostatesrankedsecondandfirst,respectively,amongIndianstatesintermsofinstalledrenewablegenerationcapacityinearly2016.12Theyarealsoamongthefirststatestocreateregulatoryframeworksforforecasting,scheduling,andbalancing.

Manystates,includingRajasthanandTamilNadu,arestillintheprocessoftranslatingtheseframeworksintopractice.Thus,thissectionalsodescribescurrentforecasting,scheduling,andbalancingpracticesinRajasthanandTamilNadu.TheexaminationofcurrentpracticesinthissectionisbasedondiscussionsandinterviewsinAugust2016.

2.2.1 StateModelRegulationsFollowingonCERC’sFramework,theForumofIndianRegulators(FOR)issuedModelRegulationsonForecasting,SchedulingandDeviationSettlementofWindandSolarGeneratingStationsattheStateLevel(“FORModelRegulations”)in2015.13TheFOR’sModelRegulationscloselymirrorCERC’sFramework,withfourkeydifferences:

1) Stipulationsforaweek-aheadforecastinadditiontotheday-aheadforecast;2) Paymentsettlementbasedonactualgeneration,ratherthanscheduledgeneration,for

intrastatesales;3) Theintroductionofqualifiedcoordinatingagencies(QCAs)asanaggregatorforsolarandwind

forecastingandsettlement;and4) Tighteningofthedeviationbandsfrom15%(intheFramework)to10%fornewgenerators.

Thoughnotexplicitlystated,theadditionoftheweek-aheadwindandsolarforecastingislikelytohelpinformthermalunitcommitment(startup/shutdown)decisionsfortheSLDCs,ascoalunitsinparticularmayhaveunitcommitmenthorizonsthatexceedaday-aheadtimeframe.Thesettlementsystemforwindandsolargeneration—basedonactualratherthanscheduledgeneration—retainsexistingintrastatesettlementpractices,ratherthanharmonizingthesewiththecentral-levelFramework.

Fromanadministrativeperspective,thislackofharmonizationbetweeninterstateandintrastateregulationsdoesnotcurrentlyappeartobeanissue,asmostwindandsolargeneratorsareinterconnectedatthestatelevelandselltoentitieswithinthatstate.However,itcouldproveproblematicifgeneratorswishtosellatboththeintrastateandinterstatelevel.Forinstance,Suzlonindicatedthatitcurrentlyhastointerconnectindividualturbinesontwoseparatefeeders,dependingon

11Heeteretal.(2016).12DataarefromMoPandCEA(2016)13FOR(2015).

18

ifitisdeliveringtointrastateorinterstatesystems,todealwithseparateaccountingsystemsforpaymentanddeviationunderstateandcentralregulations.14

Tobetterharmonizeintrastateregulationsforschedulingandsettlement,FORfacilitatedaReportonScheduling,Accounting,Metering,andSettlementofTransactionsinElectricity(SAMAST)inJuly2016,whichsoughttoconsolidateexistingexperienceandproviderecommendationsforthecreationofaninteroperablesystemofscheduling,energyaccounting,energymetering,andtransactionsettlementacrossstateboundaries.15

2.2.2 RajasthanRegulationsandCurrentPracticesRajasthanfallsundertheNorthernRLDC’sjurisdiction,althoughitsharesbordersandtradeagreementswithstatesintheWesternRLDC.Table2listskeyagencieswithinRajasthanthatareinvolvedinthedesignandimplementationofregulationsforforecasting,scheduling,andbalancingofrenewableenergy.

Table2.KeyAgenciesinRajasthanwithResponsibilityforForecasting,Scheduling,andBalancing16

Organization Role ResponsibilitiesRajasthanElectricityRegulatoryCommission

RERC SERC Issuesandenforceselectricityregulations

RajasthanRajyaVidyutPrasaranNigam

RVPN STU Plans,builds,owns,andoperatesstate-ownedgenerationandtheintrastatetransmissionsystem

RajasthanStateLoadDispatchCenter

RSLDC SLDC SubsidiaryofRVPN,overseesintrastategridsecurity

RajasthanRajyaVidyutUtpadanNigamLimited17

RUVN Discomcoordinator

Procuresresourcesonbehalfof,andschedulesresourcesfor,Rajasthan’sfivediscoms18

2.2.2.1 RegulationsRERCreleaseddraftforecasting,scheduling,andbalancingregulationsforwindandsolargenerators(“RERCRegulations”)inMarch2016.19TheregulationsmirrortheFOR’sModelRegulationsclosely,buthavethreekeydifferences.First,theregulationisonlyapplicabletowindandsolargeneratorsthathave

14BasedoninterviewswithSuzlonstaff.15FOR(2016).16SERCinthebelowtablerefersto“stateelectricityregulatorycommission”;STUrefersto“statetransmissionutility.”17RUVNwasformerlyknownastheRajasthanDiscomsPowerProcurementCenter(RDPPC).18Thesefivediscomsinclude:RajasthanVidyutUtpadanNigam,JaipurVidyutVitranNigam,AjmerVidyutVitranNigam,RajasthanRajyaVidyutPrasaranNigam,andJodhpurVidyutVitranNigam.19RERC(2016).

19

aminimuminstalledcapacityof5MW,eitherindividuallyorthroughapoolingstation.TheRERCbelievedthatforcapacitieslessthan5MWitwasverydifficulttohave“visibilityandmonitoringattheleveloftheSLDC,”andspecificallycitedrooftopsolarprojectsasthekindsofprojectsitintendedtoexcludefromcoverageundertheregulation.

Second,theregulationsareimmediatelyapplicabletoallnewwindandsolarfacilities.TheRERCexpectsnewwindandsolarfacilitiestoestablishforecastingarrangementspriortothecommissioningoftheplantandinterconnectiontothestategrid.Existingfacilitieshavethreemonthstoestablishforecastingcompliance.Andthird,thedeviationsettlementtolerancebandwassettothe15%tolerancebandasintheCERCFramework,ratherthanthetighter10%tolerancebandintheFOR’sModelRegulations.TheRERCRegulationsnotedthattheCERCtolerancebandwasa“reasonablelimittostartwith”andappreciatedthemechanism’ssimplicitytoimplementandminimalfinancialimpactonexistingPPAs.RERChasnotfinalizedtheregulationstodate,butindicatedinconversationsthatitplanstodososoon.

InadditiontothedraftRERCRegulations,RERCalsonotifiedtheintrastateABTin2006,buthasbeenunabletoenforceitduetolackofthenecessarymeteringinfrastructure.TheintrastateABTinRajasthanwouldimplementthesamestructureastheinterstateABT.Itincludesfixedcost,variablecost,andimbalancechargecomponents.ManyofthepartiesweinterviewedinRajasthanbelievedthattheimplementationofthisintrastateABTisimperativetobeingabletofullyintegratethelargeamountsofrenewablescomingonlineinthestatebecauseitwouldforcethepropermeteringandsoftwarethatwouldenablebettersystemdispatch.

2.2.2.2 CurrentPracticesThestudyteammetwithrepresentativesfromtheRERC,RSLDC,andRDPPCtobetterunderstandsystemoperationsandpractices.Thissectionprovidesasummaryofthoseconversations,withafocusoncurrentforecasting,scheduling,andbalancingpractices.

EventhoughtheRERCRegulationshavenotbeenfinalized,theRDPPCiscurrentlyreceivingdaywindaheadforecastsatthepoolingstationlevelfromIWTMAby10am.NIWEsuggestedthatREConnectandManikaramarebothprovidingforecastsforwindgeneratorsinRajasthan,eventhoughthereareonlyafewwindplantsinplace.RDPPCisdoingitsownforecastingaswell,basedonthewindspeedforecastsfromUndergroundWeather.Thisforecastisthenusedtoadjustthevendorforecast.Inpractice,RDPPCstatedthattheforecastisclosetoactualgenerationduringthehighwindseason.

Althoughintradayforecastrevisionsareprovidedbywindgenerators,asallowedintheRERCRegulations,RDPPCandtheRSLDCdidnotthinktheserevisionswereusefulinbeingabletoutilizeintradaybalancingmechanisms,suchasthepowerexchange,becausemarketprocurementdecisionsaremadeonaday-aheadtimescale.Currently,theRDPPClooksatthemarketclearingpricefromthepowerexchangeat12pmonthepreviousdayandcheckstheday-aheadrenewableforecastsandexpectedthermalgeneration.IfRDPPChasexcessscheduledcapacity,itdecideswhethertoselltotheexchangeorbackdownplantsunderitscontrol,basedontheexchangeprice.Ifithasinsufficientscheduledcapacity,itdecideswhethertobuyfromtheexchangeorturnupgenerators.RDPPCindicatedintradaypricesfromthepowerexchangearealsoexpensiveandnoteconomical.However,

20

RDPPCdidnotethatintradayrevisionstoschedulescouldhelpwithintradayschedulinganddispatchofinterstateandintrastategenerators.

RDPCCalsoindicatedthatweek-aheadforecastsfromrenewablegeneratorswouldbeveryhelpfultoRDPCCandRSLDCforunderstandingwhentheycouldturnoffthermalfacilities,astheyrequirealongertimehorizonforcommitmentdecisionsthanonaday-aheadbasis.Thisislikelyashort-termissueuntiltheregulationisfinalized,giventhatthedraftRERCRegulationsrequireweek-aheadschedules.

Forpurposesofscheduling,renewablesaretreatedasamust-runresourceinRajasthanandtheirforecastsactastheirschedules.Schedulinganddispatchoftherestofthesystemismeanttobeconductedonameritorderbasis,withunitsbeingdispatchedinvariablecostorder.TheRDPPCandRSLDCindicatedthatthevariablecostsforthemeritorderdispatchareupdatedannuallyviatariffupdates.

Oncegeneratorschedulesareset,thebalancingofloadandgenerationoccursonanintradaybasisbyRDPPC.Inthecasewhererenewablesareover-generatingrelativetoforecast(orloadisunder-forecasted),RDPPCbacksdownstategeneratorsfirsttoaccountfortheimbalance.20

Toaccountforestablishedseasonalcyclesofoversupplyanddeficit,Rajasthanhasenteredintopowerexchangeagreementswithneighboringstatesthroughfirmbankingtransactions.Theseagreementscanlastfrom15daystoamonthatatimeandareoftenputintoplaceformultipletimesinaseason.Forexample,RajasthansendspowertoPunjabandHaryanafromApriltoSeptemberwhenRajasthanhassurpluspower,andimportsfromPunjabfromOctobertoMarchwhenRajasthanisindeficit.

RDPPChasalsoencouragedthesharingofrenewableresourceswithotherstates,asRajasthanisarenewablerichstate,butnotedthattheexistingDSMhinderedthesetypesoftransactions.Currently,awindgeneratorinRajasthancontractedtoexporthalfofitsenergytoPunjabwouldfaceadeviationchargebasedonitsfullgenerationratherthanitsgenerationforexport,forwhichthedeviationsofthefulloutputcountsagainstRajasthan’sDSMlimits.Thisisanissuenowbecauseforecastinghasnotbeencompletelyimplemented,andRDPPCnotedthatthisproblemgoesawaywhenthereisbetterforecasting.

2.2.3 TamilNaduRegulationsandCurrentPracticesTamilNaduispartoftheSouthernRLDC.listskeyagencieswithinTamilNaduthatareinvolvedinthedesignandimplementationofregulationsforforecasting,scheduling,andbalancingofrenewableenergy.

Table3.KeyAgenciesinTamilNaduwithResponsibilityforForecasting,Scheduling,andBalancing

Organization Role ResponsibilitiesTamilNaduElectricity TNERC SERC Issuesandenforceselectricityregulations

20ThispracticemaybeusedtominimizeDSMpenalties,asscheduledeviationsfornon-renewablegeneratorsundertheDSMarecalculatedonaday-aheadbasis.

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RegulatoryCommission

TamilNaduTransmissionCorporation

TANTRANSCO STU Plans,builds,owns,andoperatestheintrastatetransmissionsystem

TamilNaduStateLoadDispatchCenter

TNSLDC SLDC SubsidiaryofTANTRANSCO,operatestheintrastatetransmissionsystem

TamilNaduGenerationandDistributionCorporation

TANGEDCO Discom Ownsandoperatesgeneration,ownsandoperatesdistributionsystem,servesload

TamilNaduElectricityBoard

TNEB Holdingcompany

HoldingcompanyforTANTRANSCOandTANGEDCO

2.2.3.1 RegulationsSimilartoRajasthan,TamilNaduissueddraftforecasting,scheduling,andbalancingregulations(“TNERCRegulations”)inFebruary2016.21ThesedraftregulationsaremostcloselymodeledaftertheFOR’sModelRegulationsandareapplicabletoallwindandsolargeneratorsconnectedtothestategrid,includingthoseconnectedviapoolingstationsandthosethatmaybebelow5MW(unlikeinRajasthan).AkeydifferencebetweentheTamilNadudraftregulationsandotherregulationsdiscussedinthisprimerisTamilNadu’streatmentoftheDSM.TamilNaduincludedthemorerestrictivedeviationtolerancebandforwindfacilities(10%)andcreatedaseparatedeviationmechanismforsolarfacilitieswithatighterdeviationtoleranceband(5%).AnewsetofdraftregulationswasreleasedbyTNERCforcommentwhilethisprimerwasbeingprepared,whichwouldreplacethedraftregulationsdescribedaboveifadopted.Thenewdraftregulationentitled“ModelDSMRegulationsatStateLevel”harmonizesTamilNadu’streatmentofboththermalandrenewabledeviationswithCERC’ssothatthermaldeviationsfollowDSMandrenewabledeviationsfollowtheFramework.

Inaddition,TNERChasnotifiedtheintrastateABT,buttheABThasyettobeimplementedbecausetherelevantmeteringinfrastructureandsoftwareisstillunderprocurement.TNSLDCwasstillintheprocurementprocessinAugust2016andTNERCsaidthatoptimisticallyitwouldtake12monthstoimplementoncetheinfrastructurewasinplace.

2.2.3.2 CurrentPracticesThissectionexploresthecurrentpracticesforforecasting,scheduling,andbalancinginTamilNadu.

TamilNaduwasthefirststatetoundertakeforecastingforwindgeneratorsinIndiathroughanIndo-SpanishcollaborativeforecastingpilotbetweentheNationalInstituteofWindEnergy(NIWE),basedinChennai,andVortex,aSpanishforecastingcompany.Thepilotstartedwithseveral50MWwindfarms.ThegoalwastocreateabusinessmodelforforecastinginIndia.Thesuccessofthepilothasbroughtthe

21TNERC(2016).

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majorityofwindinTamilNaduunderforecasting.Aforecastisprovidedforeverysubstationandthereareplanstoprovideforecastsattheturbinelevelaswell.WindgeneratorsarepayingfortheforecastingserviceandtheIndianWindPowerAssociation(IWPA)hasfinancedthenecessarymeters.

NIWEidentifiedtwomainchallengeswithgettingtheforecastingpilotofftheground:1)gettingTNEBtosharethedata;and2)translatingthedataintoausableform.TNEBprovidedtheneededdataafteratripartiteagreementwasreachedbetweenNIWE,TNEB,andTNSLDC,whichstatedthatthedatawouldnotbesharedoutsideofthisprocess.However,themeterdatawasprovidedinphysicallogsandonamonthlybasis.Manyoftheselogsdatedbackyears,andwereloggedonamonthlybasisbecauseajointmeterreadingbetweenarepresentativefromTNEBandthewindturbineownerwasrequiredeverymonth.Ittookayear-and-a-halfforNIWEtodigitizethereadingsandchangemonthlyreadingstodailyreadings,whichistherequiredinputfortheVortexforecastingmodel.NIWEexpectsthatgettingasimilarforecastingmodeloffthegroundinanewstatewouldtakeaboutsixmonths.

OncetheforecastsaredevelopedbyNIWE,theyaretransmittedviaemailandFTPtotheTNSLDC.TNSLDCcreatedadedicatedportalforNIWEtouploadforecastrevisionsintradayaswell.TNEBhasaskedfortheday-aheadforecaststomeetan8%deviationtolerance,whichNIWEsaidtheyweremeeting,thoughsubsequentconversationswiththeTNSLDCsuggestedthattheerrorwascloserto15%.

LikeRajasthan,TamilNadutreatswindandsolarenergyasmust-runandusesforecastsasthescheduleforwindandsolargeneration.TNSLDCmanuallydispatchesthermalresourcesthroughameritorderdispatchbasedonvariablecost.Allgeneratorsareputundermeritorder,includingindependentpowerproducers,centralgeneratingunits,andstategeneratingunits.Variablecostsareupdatedonamonthlybasisbygenerators.Systemconstraintsandlocalconditionsmaybeconsideredinthedispatchdecision.Forexample,ifTNSLDCstaffbelievethatloadwillbelowforseveraldays,theymaymanuallyde-commitaunit.Similarly,TNSLDCmanuallyforecastsloadsbasedonhistoricalloaddata,weather,andrainconditions.

Day-aheadschedulesaremadefrom10amto12pmbasedongenerationavailabilityandloadforecasts.InterstategenerationschedulesareprovidedbytheRLDCanddeclarationsmustbemadeby5pm.At5pm,TNSLDCgoestothepowerexchangetobuypowerorsellsurpluspower.IftheexchangedoesnotelectTNSLDC’snomination,thenTNSLDCmovestoun-requisitionedsurpluspower(URS)22orchangesdispatchofunitswithinthestate.TNSLDCstaffstatedthattheychoosewhichoptiontousebasedonpricetostayinlinewithmeritorderdispatch.Insupplyconstrainedsituations,TNSLDC’slastresortistoshedload.Todate,TNSLDCtradesabout500MWonaveragethroughthepowerexchange.TNSLDCdeterminestheamounttobebidandTANGEDCOdeterminestherateatwhichtobid.

TNSLDCindicatedthatitrunsallcoalunitsnolowerthanat70%ofnameplatecapacityandgasunitsnolowerthan85%ofnameplatecapacity.

22URSarepowersurplusesduetochangesinstatedeclarations.

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TNSLDCisresponsibleforloadandgenerationbalancing.TNSLDCmanuallyadjuststhermalresourceschedulesbasedonrevisionstorenewableforecasts.Itmakesintradaychangestointrastategeneratorschedulesdirectlythroughphonecallstogenerators.Generatorscantypicallyrespondtotheserequestswithin40minutestoanhourfromthephonecall.Forinterstategenerators,TNSLDCusestheRLDC’swebsitetoindicatechangestoentitledcentralstationunits.TheRLDCwebsitewillalsopostanyURSavailableforTNSLDCtouseforintradaybalancing.TNSLDCindicatedthatURS’availabilitywaslimitedbecausethoseunitswerebeingusedtoprovideancillaryservicesunderthenewinterstateAncillaryServicesOperationsRegulations.

WiththethermalfleetwithinTamilNadurestrictedtobackingdownto70%(forcoal)or85%(fornaturalgas)ofitscapacity,TNSLDConlyhas15%-30%headroomtobalanceitsgrowingrenewableresourceshare.AccordingtoIWPA,limitedflexibilityhasledtolargeamountsofwindcurtailmentinthemonsoonseasonwhenthewindisblowingandloadislow.

TNSLDCalsoexpressedthatitisinterestedinexportingwindpower.However,becausenotallwindiscurrentlyunderforecastTNSLDC’sday-aheadschedulescanvarysignificantlyfromactualgeneration,whichresultsinhighDSMchargesifthewindisnotcurtailed.Therearecurrentlynoprovisionsinwindtariffsthataddresscurtailment,whichmeansthatdevelopersareleftuncompensatedifthewindiscurtailed.Thus,developershavebeguntoseeklegalactionforcurtailmentoftheirfacilities.TNSLDCstatedthattheycurtailwindforreliabilitypurposes,thoughrepresentativesfromthewindindustryrefutethisclaimandstatethatitisagainstmeritorderdispatchprinciplesandnotaboutreliability.Someofthelegalbattlesincourtaretryingtodeterminetheexactcauseofcurtailment.

Inadditiontophysicalbalancing,TamilNaduhasfinancialbalancingmechanismsforbankingwindenergyoverafiscalyear.WhenacustomerentersintoawheelingagreementwithTNEB,theyareallowedtheoptiontobankenergy.Forexample,consideracommercialcustomerthatdevelopsawindplantthatgenerates1,000MWhinamonth.Thecommercialcustomeronlyuses800MWhthatmonth,soTNEBadjuststhecustomer’sbillandputs200MWhinthebank.Ifthecustomerdoesnotusetheenergyinitsbankbytheendofthefiscalyear,TNEBisrequiredtopaythecustomer75%ofthewindtariffratefortheenergythatisinthebank.TNEBestimatedthat20%to30%ofthewindisbeingbankedbetweenthemonsoonseasonandothertimesofyear.Thebankingconceptisalsopresentinotherstates,thoughthetermsofthebankingappeartobestatespecific.AndhraPradesh,forexample,allowsbankingovertwomonthsonly.

TNEBhasrequestedTNERCtoreviewbanking,asitfeelsthatitisoverpayingforbankedpower.TNEB’sargumentisthatthepowerusedby“banking”customersinthemiddleoftheday,whenthewindisnotblowing,ismuchlessexpensivethanthecostofthepowerthosecustomers’windfacilitiesareproducingatnight,whenTNSLDCisinminimumloadconditions.

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2.3 PriorityAreasforRenewableIntegrationBasedonthereviewinSections2.1and2.2,anddrawingonarenewableintegrationstudyconductedunderGreeningtheGrid,23weidentifyfourpriorityareasforenhancingforecasting,scheduling,andbalancingofrenewableenergyinIndia.Theseinclude:

1) Enablingeconomicdispatch;2) Enablinggreaterregionalcoordination;3) Increasingresourceflexibility;and4) Clarifyingroles,responsibilities,andauthority.

Theremainderofthissectiondescribeseachoftheseareas.

2.3.1 EnablingEconomicDispatchVariablerenewableenergy(VRE)posesuniquechallengesforloaddispatchcentersastheyimplementeconomic,ormeritorder,dispatch.Wedefine“economicdispatch”asthemarginalcost-baseddispatchofgenerationunitstominimizetotaloperatingcosts.Likehydropowerandnuclearpower,variablerenewablegenerationhashighfixedcostsandverylowvariablecosts.However,variablerenewablegenerationismorevariableandlesspredictablethaneitherhydropowerornuclearpower.Itisalsomorelikelytobeindependentlyowned,whichraisesissuesofopenaccesstotheelectricitygrid.

Thehighfixed-lowvariablecoststructureofVREsuggeststhat,undereconomicdispatch,itshouldbedispatchedwheneveritisavailable.However,duetoitshighfixedcosts,itslevelizedcostsareoften“abovemarket.”Inotherwords,marketpricesmaynotsupportinvestmentinvariablerenewablegenerationontheirown.

CurtailmentisthelargestchallengeassociatedwiththedispatchofVRE.Someamountofrenewableenergycurtailmentwillbeeconomic.Regulatoryandmarketinstitutionsplayacriticalroleindetermininghowmuchcurtailmentiseconomic.

Forinstance,RPOenforcementandcurtailmenttermsincontractsprovideanimportantsignalfortheeconomicdispatchofVRE,bycreatinganimplicitcostforrenewableenergycurtailment.Additionally,andparticularlyinstateswhereopenaccesscustomersaresigningcontractswithrenewablegenerators,openaccessregulations—includingthoseforenergyimbalanceandcongestionmanagement—playanimportantroleinsupportingtheeconomicdispatchofrenewablegeneration.Otherregulationsandrules,suchasthoseforself-scheduling,influenceincentivesforrenewableenergycurtailment.

Section3.2.1describestherecentshifttowardthinkingaboutVREasadispatchableresourceintheU.S.,andhowrenewablepolicysupportmechanisms,openaccessregulations,andongoingchangesinmarketrulesshapeincentivesforeconomicdispatch.

23Thisstudyincludesproductionsimulationmodelingwork.TheresultswillbefinalizedinMarch2017.

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2.3.2 EnablingGreaterRegionalCoordinationAsrenewableenergypenetrationsincrease,akeychallengetomaximizingitsvaluewillbeinreducingbarrierstotheexchangeofintrastaterenewablegenerationacrossstateboundaries.DoingsorequiresgreatercoordinationamongSLDCs,sothatmeritorderdispatchwithinstatesincreasinglyresemblesameritorderdispatchforregions.

Figure7showsanillustrativeexample,withseparatehourlysupplyanddemandcurvesfortworegionswhereeachregionisdispatchedseparately(lefthandside)andajointhourlysupplyanddemandcurveforbothregionswherebothregionsaredispatchedjointly(righthandside).

Figure7.IllustrationofSupplyandDemandCurvesforTwoRegionsinaGivenHourunderSeparateDispatch(LeftHandSide)andCombinedDispatch(RightHandSide)

(W1iswindgenerationinregion1,C1isregion1’sshareofa600MWinterstategenerator,S1isa300MWintrastategeneratorinregion1;C2isregion2’sshareofthe600MWinterstategenerator,S2isa600MWintrastategeneratorinregion2)

Ifbothregionsaredispatchedseparately,region1isforcedtocurtailwindgeneration(W1)andleaveitsallocationofaninterstatelowcostthermalgenerator(C1)unused,whichinturnforcesregion2torunitsmoreexpensivegenerator(S2).Ifbothregionsaredispatchedjointly,allgenerationcanbeabsorbedandthelowercostinterstatethermalgenerator(C1)canoperateallfulloutput,avoidingtheneedtooperatemoreexpensivegeneratorS2.

Themarginalcostwillbelowerforthetworegionstogetherratherthanseparately,butthefigureillustratestheeconomictransfersthatmightresultfromjointdispatch.Ifthereisasinglemarketclearingprice,customersinregion1willfacehigherwholesaleprices,whilethewindgeneratorwillearnhigherrevenues.Customersinregion2willseelowerwholesaleprices,buttheintrastategeneratorin

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region2willnotbedispatchedatall.Thus,regionalcoordinationrequiresmechanismsforfairbenefitandcostallocation.

Section3.2.2summarizesrecentdevelopmentsinregionalcoordinationintheWesternU.S.,describingeffortsbyutilities,systemoperators,andregulatorstocreatedcentralized,regionalmechanismsforintra-hourbalancing.

2.3.3 IncreasingResourceFlexibilityFromtheU.S.toGermanyandChina,risingpenetrationsofVREarechangingthewaysinwhichcoalgeneratorsaredispatched.InIndia,higherpenetrationsofvariablerenewablegenerationarealsolikelytochangehowcoalgeneratorsareused.Greaterflexibilityinloadscouldmitigatesomeoftheseimpactsandprovidealow-costmeansofbetterintegratingrenewableenergy.

Inmanycountries,includingIndia,coalgeneratingunitswerehistoricallydesignedandexpectedtooperateasbaseloadunits.Theyrequiredadayormoretostartup,usuallystayedonforlongtimeperiodsoncetheywerestartedup,hadlimitedrampingrequirements,andtypicallydidnotoperatebelow50%to70%oftheirnameplatecapacity.IntegrationofVREisrequiringcoalunitstooperateatlowerminimumgenerationlevels,rampmorefrequentlyandoveralargeroutputrange,andmorefrequentlystartupandshutdown(“cycle”).24

Onthedemand-side,emergingtechnologiesandoperatingstrategies—suchasenergymanagementsystemsforautomateddemandresponse,smartchargingforelectricvehicles,customer-sideenergystorage,andsmartinvertersondistributedPVsystems—canenableloadtobetterfollowrenewablegeneration,reducingtheneedtorampandcyclecoalunits.Thesedemand-sidetechnologiescouldhaveimportantapplicationsforrenewableintegrationinIndia.

Section3.2.3describeseffortsbyplantowners,utilities,andregulatorstomakecoalunitsandloadsmoreflexible,includingchangesinincentivestocompensateownersandoperatorsfortheirhighercosts.

2.3.4 ClarifyingRolesandResponsibilities,andAuthorityLow-costintegrationofrenewableenergywillrequireefficientinteroperationofIndia’sinterstateandintrastatepowersystems.Efficientinteroperation,inturn,willdependoncleardelineationofroles,responsibilities,andauthority—(1)vertically,amongnational,regional,andstateorganizations,and(2)horizontally,amongsystemoperators,generators,transmissionowners,andserviceproviders—astheinterstate-intrastatesystemevolvesinresponsetohigherpenetrationsofrenewableenergy.

TheU.S.electricitysectorhasundergonesimilarinstitutionalandorganizationalchangesoverthelasttwodecades.Additionally,withtherecentemergenceofcentralizedbalancingmechanismsintheWesternU.S.,verticalandhorizontalrolesandresponsibilitiesinthatregionarenowchanging.U.S.

24RecentCERCpolicychangeswillreduceminimumgenerationlevelsto55%forinterstateunits.

27

experienceindemarcatingroles,responsibility,andauthorityinanevolvingregional,federalistcontextisdescribedinSection3.2.4.

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3 U.S.ExperiencewithForecasting,Scheduling,andBalancingofRenewableEnergy

AsIndianregulatorsseektoaddressemergingchallengesintheforecasting,scheduling,andbalancingofrenewableenergy,U.S.experiencemayofferusefulinsights.Thissectiondrawsonthreecasestudiestoexaminehowthefourpriorityareasidentifiedintheprevioussectionhavebeen,orarebeing,addressedinaU.S.context.

ThesectionfirstprovidesessentialbackgroundonownershipandindustrystructureintheU.S.electricitysector,alongwithanoverviewofthethreecasestudyareas.ItthendescribesU.S.experienceinthefourpriorityareas:

• Enablingeconomicdispatch—howpolicy,openaccessregulations,andmarketdesignshasshapedtheeconomicdispatchofVREintheU.S.

• Enablinggreaterregionalcoordination—howU.S.statesexpandedpowersystemcoordinationtobetterintegraterenewableenergy

• Increasingresourceflexibility—howpowersystemsintheU.S.increaseflexibilityonthesupplyanddemandsides,toprovidesystemoperatorswithmoreoptionstoaccommodatevariabilityanduncertaintyinwindandsolargeneration

• Clarifyingroles,responsibilities,andauthority—howroles,responsibilities,andauthorityofregulators,systemoperators,utilities,andgeneratorsintheU.S.haveevolvedtoaddressrenewableintegrationchallenges

3.1 Background3.1.1 Ownership,Regulation,andIndustryStructure

Figure8.Independentpowerproducersnowaccountforalargeshareofgas-fired-,nuclear,andrenewablegeneration(A);mostelectricitysalesarebyadiversemixofincumbentutilities(B)25

25Generationdata(A)arefromtheU.S.EnergyInformationAdministration(EIA),“NetGenerationbyEnergySource,”http://www.eia.gov/electricity/annual/.Electricitysalesdata(B)arefromEIA,“FormEIA-826detaileddata,”https://www.eia.gov/electricity/data/eia826/.

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TheU.S.electricitysectorhasalwaysbeenorganizationallycomplexandhighlyfragmented,withnumerousactorsandadiversemixofprivateandpublicownership.Independentpowerproducersnowaccountfor50%ofgas-firedandnucleargenerationand85%ofrenewablegeneration(Figure8A),withpublicandprivateutilitiesgeneratingtheremainder.Alargenumberofincumbentutilitiesstillaccountforthemajorityofelectricitysales,including199regulatedinvestor-ownedutilities(61%oftotalsales),856ruralelectriccooperatives(13%),and824publicly-ownedmunicipalutilities(12%)(Figure8B).

LikeIndia,theU.S.electricityregulatorysystemhasafederalistdivisionofpowersthatisrootedinlaw.TheFederalEnergyRegulatoryCommission(FERC)hasjurisdictionoverinterstatetransactions,whicheffectivelygivesitoversightoverthehighvoltage(“bulk”)transmissionsysteminmoststates.Stateshavejurisdictionoverdistributionsystemsandretailpricing.Theinterplaybetweenfederalandstateregulatoryauthorityshapesmanyoftheissuesdiscussedinthissection.

Figure9.MostoftheWesternandSoutheasternU.S.doesnotparticipateinanRTO/ISO(A);tradinghubsplayanimportantroleineconomicdispatch(B);theWesternU.S.hasamanybalancingareas(C)

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Sincethe1990s,theU.S.hasseenthegrowthandexpansionofregionaltransmissionorganizations(RTOs)andindependentsystemoperators(ISOs)thatoperatewholesalemarkets.26However,largeportionsoftheU.S.,includingmostoftheWesternandSoutheasternU.S.,arenotpartofanRTOorISO(Figure9A)—withCaliforniabeingthemajorexception.Intheseregions,utilitiesstilltradewithoneanotherandpurchasepowerfromnon-utilitygeneratorsthroughtradinghubs(Figure9B)andbilateral(over-the-counter)tradesandpowerexchange.IntheWesternU.S.,bilateralexchangeplaysaparticularlyimportantroleincoordinatingamongutilitiesbecauseofthelargenumberofbalancing(control)areas—atotalof38(Figure9C).

AcrossjurisdictionsintheU.S.,industrystructurescanbecategorizedbytwomainfeatures:(1)theextentofretailcompetition,27ifany;and(2)whetherthejurisdictionparticipatesinanRTOorISO(Table4).Table4illustratesthatthereisnosimpletaxonomyfortheU.S.electricityindustry.RTOstypicallyincludeamixofverticallyintegratedutilitiesandcompetitiveretailproviders,asaresultofdifferentpoliciesamongstateswithintheRTOregion.MunicipalutilitiesinstateswithISOsmay(Texas)ormaynot(partsofCalifornia)participateinISOmarkets.

Table4.IndustrystructuresintheU.S.canbecategorizedbytheextentofretailcompetitionandRTO/ISOparticipation(seeFigure9AforRTO/ISOfootprints)

RetailCompetitionRTO/ISOParticipation

No YesNo

Verticallyintegratedutilityo PublicServiceColorado(Colorado)o LosAngelesDepartmentofWater

andResources(California)

Verticallyintegratedutilityo DominionPower(Virginia),PJMo NorthernStatesPower

(Minnesota),MISOo CPSEnergy(Texas),ERCOT

Limited Verticallyintegratedutilitywithlimiteddirectaccess28o PacifiCorp(Oregon)

Verticallyintegratedutilitywithlimiteddirectaccesso DTEEnergy(Michigan),MISORestructuredutilitywithlimiteddirectaccesso PG&E(California),CAISO

Yes N/A Defaultserviceprovidero ConEd,NYISO(NewYork)o AEP(Pennsylvania),PJMWiresonlycompanywithseparateprovideroflastresorto Oncor(Texas),ERCOT

26ThemaindifferencebetweenanRTOandISOisnowthatanRTOoperatesacrossstates,andanISOoperateswithinastate.27“Retailcompetition”intheU.S.referstotheopeningupofverticallyintegratedutilities’retailbusinesstoeithercompetitivethird-partyretailprovidersorlargeindustrialcustomersthatprocurecapacityandenergydirectlyfromgeneratorsortheenergymarket.28“Limiteddirectaccess”referstocasesinwhichalimitednumberofcustomersareabletofreelychoosetheirsuppliers.

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3.1.2 DescriptionofCaseStudyAreasThethreecasestudiesrepresentdifferentkindsofsystemoperatorswithinthespectrumofindustrystructuresdescribedinTable4.ThesecasestudieswereselectedbecauseoftheirrelevancetotheIndiancontext.

• CaliforniaIndependentSystemOperator(CAISO),California.TheCAISOisanindependentsystemoperatorthatmanagesthehighvoltagetransmissionsystemformostofCaliforniaandasmallpartofNevada,andadministersday-ahead,real-time,andancillaryservicesmarkets.

• PacifiCorp,Oregon.PacifiCorpisaverticallyintegratedutility,headquarteredinOregon,thatoperateselectricgridsacrosspartsofsixdifferentstates—California,Idaho,Oregon,Utah,Washington,andWyoming.PacifiCorprecentlyestablishedajointenergyimbalancemarket(EIM)withtheCAISO,thoughitisnottechnicallypartofanRTOorISO.

• PublicServiceCompanyofColorado(PSCo),Colorado.PSCoisaverticallyintegratedutilityownedbyXcelEnergy,aholdingcompanythatownsutilitiesineightstates.PSCoisnotpartofanRTOorISO,thoughitrecentlysignedajointagreementwithtwoneighboringutilitiesforcentralizedreal-timedispatch.

Allthreeoftheseentitiesareeffectivelysystemoperators,thoughCAISOisindependentandPacifiCorpandPSCoareverticallyintegratedutilities.PacifiCorpandPSCohaverecentlyjoined,orarejoining,centralizedbalancingmarkets.Thethreeentitiesfacilitatedifferentlevelsoftradethroughtheirtransmissionsystems(Table5).

Table5.CAISO,PacifiCorp,andPSCoaredifferentkindsofsystemoperatorsand

Systemoperator

Type Centralizedmarkets

Leveloftradefacilitation

CAISO Independentsystemoperator

CAISO High

PacifiCorp Verticallyintegratedutility

CAISOEIM Low

PSCo Verticallyintegratedutility

None;creatingjointdispatch

Medium

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3.2 U.S.Experience3.2.1 EnablingEconomicDispatch

IntheU.S.,economicdispatchisofficiallydefinedas“theoperationofgenerationfacilitiestoproduceenergyatthelowestcosttoreliablyserveconsumers,recognizinganyoperationallimitsofgenerationandtransmissionfacilities.”29Inpractice,economicdispatchisimplementedintheU.S.usingsoftwaretominimizetotaloperatingcostsoverthecourseofaday,subjecttogridsecurityconstraints.InRTOmarkets,costminimizationisonthebasisofmarketparticipants’marginalcost-basedbids.Innon-RTOareas,costminimizationisonthebasisofgeneratorvariablecosts.Inbothcases,generators’fixedcostsarenotincludedinthecostminimization.

EconomicdispatchhasbeenanimportantenablerofvariablegenerationintheU.S.Historically,windandsolargenerationwereconsideredtobenon-dispatchable(“must-run”)resources.Increasingly,windandsolargenerationarebeingviewedandoperatedasfullydispatchableresources,abletoprovidethesameservices—voltagecontrol,frequencyresponse,rampingsupport—asconventionalgenerators.Windandsolargeneratorsaredispatchedbycurtailingtheiroutput.

Thisshifttowardgreaterdispatchabilityofwindandsolargenerationhasalsopromptedashiftfromthinkingaboutwindandsolarcurtailmentasareliabilityproblemtothinkingaboutitasaneconomicproblem.“Economic”curtailmentofwindandsolargenerationthenraisesthequestion:Howmuchcurtailmentiseconomic?

ThissectiondescribesthreeareasofpolicyandregulationthatshapehowVREistreatedineconomicdispatchintheU.S.:(1)renewableportfoliostandards(RPS),whicharefunctionallysimilartoIndia’sRPOs,andpowerpurchasecontractterms;(2)openaccessregulations;and(3)marketrules.

3.2.1.1 RenewablePortfolioStandardsandContractTermsRenewableenergydevelopmentintheU.S.hasbeendriventoalargeextentbystateRPStargets.RPStargetsprovideameanstoreconcilethe“above-market”costsandlowmarginalcostsassociatedwithVRE.Thatis,onceVREisinstalleditshouldbeoperatedasmuchaspossiblebecauseithasverylowmarginalcosts.However,thecostsofbuildingvariablerenewablegenerationareoftenhigherthanaveragemarketorutilitycosts.

29DOE(2007).

KeyQuestions:

• Howis‘economicdispatch’definedintheU.S.?• WhyisitimportantforsupportingVRE?• HowdoRPSpolicies,contractterms,openaccessregulations,andmarketdesignshapethe

economicdispatchofVRE?

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Thisdynamicbetweenfixedandvariablecostscanbemosteasilyunderstoodinthecontextofverticallyintegratedutilities.Autilitythatownswindgeneration,forinstance,willseektoensurethatitoperateswheneveravailableinordertominimizetheutility’sfuelcosts.However,theutilitywillneedtohaveareasonandregulatoryapprovaltobuildthewindgenerationinthefirstplace,particularlyifthecostofwindgenerationwillincreasetheutility’saveragecosts.

Non-utilitywindandsolargeneratorstypicallyrequirelong-termpowerpurchaseagreements(PPAs)tosecurefinancing.WithoutanRPSrequirementorspecifictermsinthecontractthatlimitcurtailment,themarginalchoiceforloadservingentitieswilloftenbebetweenpayingahigherPPApriceforwindandsolargenerationandusing/buyingcheapergeneration.Withoutincentivestothecontrary,loadservingentitieswilltendtotrytoshiftcurtailmentcostsontowindandsolargenerators.

RPSRequirements,Contracts,andEconomicDispatch

Considerasmallregulatedutilitywith1,000GWhofsalesanda30%RPSrequirementthatwillrequireittoprocureatleast300GWhofenergyfromrenewablegenerators.ThepenaltyforRPSnoncomplianceis$100perMWhbelowtheRPSobligationandtheutilitywillberequiredtoabsorbthesecosts.

Theutilitysignsa$40/MWhcontractwithfor125MWofwindthatitprojectswillhavea30%capacityfactor,generating329GWhofenergyandallowingtheutilitytosafelymeetitsRPStarget.Theutilityprojectsthatitwillneedtocurtailthewindenergyonsomeoccasionsforreliabilityandeconomics.Itsreplacementcostforrenewableenergyis$50/MWh.

Tokeepcurtailmentratesbelow29GWh(9.5%)andavoidnoncompliancepenalties,theutilitywouldbewillingtopayupto$50/MWhor$100/MWh,dependingonthetimingofRPSenforcement.Toensurethatwindisdispatchedefficiently,theutilityincorporatesthewindgenerationintoitssecurityconstrainedeconomicdispatchatapriceof-$50/MWh.Belowthisprice(morenegative),itwillbemoreeconomicfortheutilitytobuymorerenewablegenerationreplacegenerationfromthewindproject.

Thisimplicitpricehelpstoguidetheutility’sdispatchdecisions.Forinstance,iftheutilityhasatake-or-paycontractwithanaturalgasgeneratorfor$30/MWh,the$50/MWhreplacementcostsuggeststhatitwillbemoreeconomicto“curtail”thenaturalgasgeneratoranddispatchthewindgenerator,iftheutilitywereforcedtochoosebetweenthetwo.

Curtailmenttermsinrenewablegeneratorcontractscanhaveasimilareffectasareplacementvalue.Forinstance,iftheutilityagreestopaythewindgenerator$40/MWhforcurtailmentabovea5%level,theutilitywilluse-$40/MWhasamarginalpricetoguidemarginalprocurementdecision-making.

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PenaltiesforRPSnoncomplianceandcontractualrequirementsthusprovideanimportantsignalforeconomicdispatch,byprovidinganincentiveforloadservingentitiestotreatwindandsolargenerationmoreaslowmarginalcostresources,ratherthanresourceswithhighPPAprices.RPSpenaltiesandcontractualtermseffectivelyactsasanimplicitpriceforwindandsolarcurtailment.Theboxaboveexplainsthemechanicsofthisimplicitprice.

3.2.1.2 OpenAccessRegulationsOpenaccessregulationsintheU.S.shapetheeconomicdispatchofvariablerenewablegenerationintwoimportantways:(1)theyprovideameansfornon-utilitiestoscheduleandbalancevariablerenewablegenerationonutility-ownedtransmissionsystems;and(2)theyprovidemarginalincentivesforthecurtailmentofvariablerenewablegeneration.

OpenaccessregulationsintheU.S.stemfromFERC’sOrder888(1996),whichrequiredutilitiestoprovidenon-utilitygeneratorswithnon-discriminatoryaccesstotheirtransmissionsystems.WithinOrder888andFERC’ssubsequentopenaccessorders,30requirementsformechanismstoaddressenergyimbalancesandcongestion-relatedredispatchplayanimportantroleinshapingthedispatchofvariablerenewablegeneration.

Non-RTOutilitiesandRTOs/ISOshavetakendifferentapproachestomeetingtheserequirements.Innon-RTOcontexts,FERCrequiresthatutilitiesoffertransmissionservicestothirdpartiesthatarecomparabletowhatthey“offer”themselves,includingphysicalrightstothetransmissionsystem,energyimbalanceservices,andredispatchservices(Table6).InRTO/ISOcontexts,RTOs/ISOsmettheserequirementsthroughlocationalmarginalprice-(LMP-)basedreal-timemarketsandfinancialtransmissionrights(Table6).31

30TheseincludeOrder889,890,and2000.31FERCOrder2000requiredRTOstodevelopthesemarket-basedmethodsforcongestionmanagement.LMPsaremarginalpricesatdifferentnodeswithinasystem,andreflectthemarginalcostofgenerationandtransmissionlossesateachnode.Insimpleterms,LMPsrepresentthelowestcosttosupplyenergyatthatpointinthesystemduetothecombinedeffectofgeneratoravailabilityandtransmissionconstraints.FinancialtransmissionrightsenabletheownertoearnthedifferencebetweenLMPsatdifferentpricenodes.

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Table6.Openaccessmechanismstosupporteconomicdispatchvaryacrossnon-RTOandRTO/ISOcontexts

Non-RTO RTO/ISOPhysicalrights.Generatorscanpurchasefirm,conditionalfirm,andnon-firmtransmissionrights.Ifthenetworkiscongested,non-firmschedulesarecurtailedfirst,conditionalfirmsecond,andfirmrightslast.

Financialrights.Generatorsandcustomerscanpurchasefinancialtransmissionrights,whichallowtherightsholdertohedgedifferencesinlocationalpricesifthenetworkiscongested.

Redispatchservice(“plannedredispatch”).Generatorscanpayutilitiestoredispatchutility-ownedgenerationtorelievecongestion,insteadofcurtailingnon-utility-ownedgeneration.

Real-timemarket.Schedulers(generatororload)thathaveimbalancespayorarepaidatthereal-timeLMP.Ifthenetworkiscongested,thesystemoperatorredispatchesbasedoneconomicbidsinthereal-timemarkettotheextentpossible.Nodalpricingreducestheneedforredispatch.

Energyimbalanceservice.Ifactualgenerationdeviatesfromschedulewithinapresetrange,generatorspay(orarepaid)theutility’sincrementalcost;athigherdeviationscharges(payments)areatFERC-regulatedmultiplesofincrementalcost.

Twotermsfromthe“non-RTO”columnofTable6warrantfurtherdescription.First,FERCproposedthe“conditionalfirm”categoryspecificallytoprovidevariablerenewablegenerationwithanalternativetofirmtransmissionservice,whichispricedonacapacity(dollarsperMWpertimeperiod)basisandisthusanexpensivewayforrenewablegeneratorstohedgeagainstcongestion.Conditionalfirmserviceprovidesfirmrightsduringallhoursexceptalimitednumberofon-peakandotherutility-designatedhours.Second,bothconditionalfirmserviceandredispatchservicerequirerequestsfromgeneratorsandtriggerutilitystudiestodetermineiftheycanbemadeavailable.Inbothcases,theyweremeanttoprovideshort-termrelieffromcongestion-relatedcurtailmentuntilthetransmissionsystemcouldbeupgradedtorelievecongestion.

Openaccessmechanismshaveplayedanimportantroleinsupportingtheeconomicdispatchofnon-utilityrenewablegeneration,byprovidingacost-based(non-RTO)orbid-based(RTO/ISO)priceforscheduleimbalancesandcurtailment.Inanon-RTOcontext,renewablegeneratorspayorarepaidforscheduledeviations(forecasterror)basedontheutility’sincrementalcost—itscostofsupplyinganequivalentamountofenergy.Toreducethefinancialrisksofcongestion,non-utilityrenewablegeneratorscanbuyfirmorconditionalfirmtransmissionrights,orinprinciple,couldpayutilitiesforredispatchservice.

InanRTO/ISOcontext,renewablegeneratorsortheirschedulerspayorarepaidforscheduledeviationsatthereal-timeLMP.Renewable-energy-relatedcongestionismanagedthrougheconomicbidsinthereal-timemarketbeforeresortingto“non-economic”curtailmentofrenewableenergy.RTO/ISO

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marketsthusnaturallyprovideameanstomanagethescheduledeviationsandcongestionassociatedwithvariablerenewablegeneration.

Openaccessmechanismsalsoplayanimportantroleinshapingmarginalincentivesforcurtailment,byrevealingpricesforcurtailment.Thefollowingboxillustrateshowtheseopenaccessmechanismsshapemarginalincentivesincost-basedandmarket-basedenvironments.

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OpenAccess,EconomicDispatch,andRenewableEnergy

Asthebelowexampleillustrates,openaccessrulesinnon-marketandmarketcontextsdifferandtheiroutcomesarenotstrictlycomparable,butinbothcasesopenaccesssupportseconomicdispatchofrenewableenergy,leadingtolowershort-runcostsandprices.

Considerawindgeneratorthathassigneda$40/MWhpowerpurchaseagreement(PPA)withautility.ThePPAdoesnotspecifytermsforcurtailment.Thewindgeneratorforecaststhatitwillhaveanaverageof100MWofoutputinsomeoff-peakhours.Theutilityforecaststhatitwillhave1,000MWofloadinthathour,buthasalreadyscheduled1,000MWofitsowngenerationtomeetthatload.Theutility’smarginalunitisa100MWthermalgeneratorwithavariablecostof$30/MWh.

Howwouldthissituationberesolvedinnon-marketandmarketcontexts?

Non-market.Thewindgeneratorwillloseallofitsrevenueifitiscurtailed,soitwillgenerallybewillingtopayfortransmissionserviceorfortheutilitytoredispatchthe100MWgeneratorinordertoreceiveitsPPAprice.Becausethewindgenerator’smarginalcostisnear$0/MWh,itwould,inprinciple,bewillingtopaytheutilityuptoitsPPApriceof$40/MWhforshort-termfirmtransmissionserviceorredispatchservice.Theutilitywouldhavecostsavingsof$30/MWhfromdispatchingthewind,butwouldhavetopaythe$40/MWhPPAprice.

Iftheutility’sdailyrateforoff-peaktransmissionserviceis$25/MW-day,thewindgeneratorwouldearnnetrevenuesof$1,500(=[$40/MWh-$25/MW-day-$0/MWh]*100MW)andtheutilitywouldearnnetrevenuesof$1,500(=[$25/MW-day+$30/MWh-$40/MWh]*100MW)inthathour.Iftheutilityhaspublishedaredispatchcostof$15/MWh,thewindgeneratorwouldearnnetrevenuesof$2,500(=[$40/MWh-$15/MWh-$0/MWh]*100MW)andtheutilitywouldearnnetrevenuesof$5/MWh[$15/MWh+$30/MWh-$40/MWh]*100MW)inthathour.Regardlessofwhetherthewindgeneratorselectsfirmtransmissionorredispatchservice,boththewindgeneratorandtheutilityarebetteroffthantheywouldhavebeenunderthecounterfactual,wherethewindgeneratoriscurtailed.

Market.Assumethatthewindgeneratorandutilityarenowpartofalargermarket.Thegeneratorbidsintothemarketdirectly,andthePPAbetweenthegeneratorandutilityisacontractfordifferences.Thewindgeneratorwillbidintothemarketatazero(ornegative)price,asitearnsnorevenuesifitdoesnotclearthemarket.Assumethatthemarginalgeneratorwouldhavebeentheutility’s$30/MWh100MWunit,butthatthewindgeneratordisplacedthisunitandthatthenewLMPis$25/MWh.

Thewindgeneratorispaid$2,500(=$25/MWh*100MW)bythesystemoperatorand$1,500(=[$40/MWh-$25/MWh]*100MW)bytheutilityforthecontractfordifferences,earningitsfullPPAvalueof$4,000inthathour.Theutilitypays$25,000tothesystemoperator(=$25/MWh*1000MW),and$1,500tothewindgenerator(=[$25/MWh-$40/MWh]*100MW),reducingitsprocurementcostsfrom$30,000,witha$30/MWhLMP,to$26,500.Whether,onbalance,thissituationisbettereconomicallyfortheutilitywilldependontheopportunitycostoflostinframarginalrentsonitsowngenerationfromthereductioninLMP.Inanycase,thewindgeneratorwillreducemarketenergypricesforallcustomers.

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3.2.1.3 MarketDesignsEvenwithinorganizedmarkets,RTOsandISOsintheU.S.havecontinuedtoremovebarrierstoeconomicdispatchinresponsetorisingpenetrationsofrenewableenergy.CAISOprovidesanillustrativeexample.Beforeitsmarketredesignandtechnologyupgrade(MRTU)in2009,CAISOwasessentiallyabilateralmarket,whereschedulingentitiessubmittednearlybalancedschedulestotheCAISOandwererequiredtopurchase(orsell)anyshortfalls(surpluses)intheCAISO’sreal-timeenergymarket.Generatorsandnon-utilityloadswereabletopurchasephysicaltransmissionrightstohedgeagainstcongestioninthereal-timemarket.

WithMRTU,CAISOcreatedafinanciallybindingday-aheadmarketandmovedfromzonalpricingandphysicaltransmissionrightstoLMPsandfinancialtransmissionrights.Schedulingcoordinators—organizationsauthorizedtosubmitschedules—werestillableto“self-schedule”resourcesaspricetakers,submittingquantity(MW)bidswithoutacorrespondingprice($/MWh)bid.CAISOalsograndfatheredsomeexistingfirmtransmissionrightsholdersintothisnewsystem.Self-scheduledbidsandexistingrightsholdersweregrantedpriorityindispatch,becausetheyhadnopriceassociatedwiththeirbidsandthusweretechnicallynotpartofeconomicdispatch.CAISOwouldmanuallycurtailtheseresourcesonaproratabasisduringcongestionevents.32

Risingpenetrationsofrenewableenergymadethissystemmoreobviouslyuneconomic.In2010,aCAISOstudyfoundthatself-schedulingwouldbeanobstacletomeetingCalifornia’s2020renewableportfoliostandardgoal,whichatthetimewas20%.33Self-schedulingeffectivelycreatedaninflexibleblockofgenerationthatcouldnotberedispatchedintheCAISO’snormalmarketprocesses,andwouldforcetheCAISOtocurtailrenewablegenerationratherthaneconomicallybackingdownself-scheduledgeneration(Figure10).

32Formoreoncurrentself-schedulingpracticeswithintheCAISO,seetheCAISOtariff,https://www.caiso.com/Documents/ConformedTariff_asof_Apr25_2016.pdf.33CAISO(2010).

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Figure10.Self-ScheduledGenerationLeadstoHigherLevelsofRenewableCurtailment(IllustrativeExample)34

In2014,theCaliforniaPublicUtilitiesCommission(CPUC)andtheCAISOrespondedbyrequiringLSEstoholdaminimumquantity(MW)offlexibleresourcesforeachmonth,definedintermsoframpingcapability.TheCPUCandCAISOrequiredtheseresourcestosubmiteconomicbidsintotheCAISOenergymarkets.Thisprogram,knownasflexibleresourceadequacycriteriaandmust-offerobligation(FRAC-MOO),reducestheamountofself-schedulingbyrequiringsomepreviouslyself-scheduledresourcestosubmiteconomicbids.35InadditiontoFRAC-MOO,theCAISOhasproposedorundertakenanumberofotherinitiativestoexpandeconomicdispatch,includingloweringthebidfloorandforcingself-scheduledgeneratorstopaybidcostrecoverycosts.36TheseinitiativeswillincreasinglyallowtheCAISOtocurtailschedulesaccordingtoeconomicbidsratherthandoingsomanuallyonaproratabasis.

34Thisfigureisbasedon2015load,solar,andwinddatafortheCAISO,adjustedsothatwindandsolaraccountfor8%and17%,respectively,oftotalsystemenergy(from5%and4%in2015),andassumingself-scheduledenergyaccountsfor25%oftotalsystemenergy.35FormoreonFRAC-MOOandhowitfunctionsintheCAISOmarket,seeCynthiaHinman,2014,“FlexibleResourceAdequacyandMustOfferObligation(FRACMOO)Pre-MarketSimTraining,”https://www.caiso.com/Documents/Presentation-FlexibleResourceAdequacy_MustOfferObligationTraining.pdf.36Specifically,CAISOproposedloweringthebidfloorfromnegative$150/MWhtonegative$300/MWh,requiringgeneratorstopaymoretoremainonlineduringcongestionevents.Byrequiringschedulingcoordinatorstopaybidcostrecoverycosts—bidcostsnotrecoveredthroughthemarket—forallgeneration,andnotjustthosesubmittingeconomicbids,theCAISOprovidesanadditionaldisincentiveforself-scheduling.SeeKallieWells,2016,“Self-SchedulesBidCostRecoveryAllocationandBidFloor:DraftFinalProposal,”http://www.caiso.com/Documents/Agenda_Presentation_Self_SchedulesBidCostRecoveryAllocation_BidFloor.pdf.

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3.2.2 EnablingGreaterRegionalCoordination

Oneofthemostrobustandsignificantfindingsfromthegrowingbodyofworkonrenewableenergyintegrationistheimportanceofclosercoordinationamonglocalbalancingareasforreducingtheinvestmentandoperatingcostsofhighpenetrationrenewableelectricitysystems.Although“regionalcoordination”and“largerbalancingareas”havebecomestandardprescriptionsforrenewableenergyintegration,cooperationacrossstatesorcountriesisoften,infact,notasimplematter.Utilitiesinroughlyone-thirdofU.S.states,forinstance,havehistoricallynotbeenpartofaregionalbalancingarea.PastattemptstoregionalizeintheWesternU.S.havefailed,including,IndependentGridOperator(IndeGO),RegionalTransmissionOrganizationWest(RTOWest),GridWest,andDesertStar,amongothers.Therewasaconfluenceoffactorsthatkepttheseeffortsfromsucceeding,ofwhichtheCaliforniaelectricitycrisiswasthelargest.Theelectricitycrisishappenedfrom1999-2001afterCaliforniaunbundleditsverticallyintegratedutilitiesandcreatedasetofwholesalemarketstofacilitateelectricitytransactions.Pricessoaredduringthecrisis,astherewasmarketmanipulationwhichledtolackofsupply,andthestateexperiencedrollingblackouts.ThecrisismademanypeopleintheWestwaryofcompetitivewholesaleenergymarkets.

However,thechangingdynamicsofthegrid,suchaschangingpowerflowsduetowindandsolar,successfultrackrecordofwholesalemarketsinotherpartsoftheU.S.,andlow-cost,low-riskregional

KeyQuestions:

• WhathasmotivatedincreasedregionalcoordinationintheU.S.?• WhatareexamplesofU.S.modelsofregionalcoordinationandtowhatdegreedotheydiffer

fromoperationsinaverticallyintegratedutilitywithoutaccesstocentralizedmarkets?• Whatisthevaluepropositionofextendingabalancingarea(i.e.,centralizingoperationsacross

multiplebalancingareas)?

Summary:

• OpenaccessruleshavebeenimportantfortheeconomicdispatchofrenewableenergyintheU.S.

• Economicdispatchofvariablerenewableenergysuggeststhatitshouldbedispatchedalmostallthetime,unlessnotdoingsowouldleadtoreliabilityviolations.

• Combinedwithplatformsforinterstatetrade,cost-basedcongestionmanagementandimbalanceenergymechanismscould,inprinciple,provideapartialsolutionforeconomicallyrationalizingcurtailmentanddeviationofgeneratorschedules.

• Limitationsincost-basedapproacheshaveledutilitiesandstatestoexploreparticipationinregionalmarkets,describedlaterinthissection.

• Evenwithinmarkets,marketdesignsarecontinuingtoevolvetoenableanexpansionofeconomicdispatchthatsupportsvariablerenewableenergy.

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coordinationmechanisms,suchasreal-timemarketsthatuseexistingtransmissioncapacity,haveencouragedmoreregionalcoordinationinrecentyears.Inaddition,theregionalmechanismsthathaverecentlysucceededintheWesternU.S.havebeenincrementaltoexistingsystemoperationsandavoidlargechangesinregulatoryauthoritybetweenstateandfederalregulators.

HistoricalandmorerecentU.S.experienceillustratethewaysinwhichcoordinationamongstate-orientedbalancingareascanevolve.RTOsintheU.S.oftengrewoutofregionalpowerpools,whereutilitiesacrossmultiplestatespooledtheirgenerationandloadsandanindependentregionalsystemoperatordispatchedgenerationtomeetdemandattheleastpossiblecost.Powerpoolstypicallyhadclearcostsavingsandtransparentmechanismstoallocatethosesavingsamongmemberstates,andRTOswereabletobuildonthesekindsofcooperativemechanisms.

Thissectionwillfocusontwoofthecasestudies,PSCoandPacifiCorp,andwalkthroughtheirtransitionsfromutilitieswithnoexposuretocentralizedmarketstoparticipationinjointdispatchandenergyimbalancemarkets,respectively.Figure11belowshowswherethecasestudiesfallalongthespectrumofregionalcoordinationmechanisms,withmorecentralizationoccurringasactivitiesbecomemorecoordinatedregionally.PSCoandPacifiCorpstartedinpurelybilateralmarkets(leftendoffigure),havemovedtoparticipatinginreal-timemarketlikemechanisms(middleofthefigure),andareevaluatingfullcentralizedmarketparticipation(rightendoffigure).

Figure11:Regionalcoordinationspectrumincasestudies

Thecasestudieswillhighlightthemotivationtomovetowardsregionalcoordinationanddescribetheevaluationprocesseachutilityunderwenttodeterminethevalueofmovingtoaregionalmarket

42

structureforitscustomers.Italsotouchesontherolethestateandfederalregulatorsplayedinthedevelopmentofeachregionalmarketmechanism.

3.2.2.1 PublicServiceofColorado(PSCo)Coloradohasambitiousrenewableenergygoals--a30%RPSby2020forinvestorownedutilitiesanda10%-20%RPSby2020formunicipalutilitiesandelectriccooperativesdependingontheirsize.37OfthewindresourcesdevelopedtomeettheRPStodate,PSCoownsoroperatescloseto95%ofthem.38Forasmallbalancingareaauthoritywithlimitedtransmissionconnectionstoneighboringmarkets,PSCohasbecomeadeptatoperatinghighwindelectricsystemsonitsown.Ithasbeenaleaderindevelopingwindforecastingtechniques,testingsystemdispatchtechnologiesandpolicies,andstudyingflexibilityneedsassociatedwithhighrenewablesystems.Evenwithallofthesemeasuresinplaceandongoingresearch,PSCohashadtocurtailabout3%ofitswindgenerationduetolimitedflexibilitywithinitsbalancingarea.39PSCo’sparentcompany’sexperienceinregionalmarketsinotherpartsofthecountryservedasagoodexampleforhowmarketbasedelectricitysystemcanhelpintegraterenewables,whichmotivatedPSCotoexplorewhatregionalcoordinationmarketbasedmechanismsmightworkintheColoradocontext.40

PSCorecentlycollaboratedwithtwootherutilitiesinitsbalancingarea(PlatteRiverPowerAuthority(PRPA)andBlackHillsColoradoElectricUtilityCompany(BHCE))toenterintojointdispatchservice.41ThejointdispatchserviceisofferedthroughPSCo’sopenaccesstransmissiontariff(OATT),whichisatariffthatprovidesdifferenttypesoftransmissionservice(includingbalancing)overautility’stransmissionsystem.42Thoughthereareonlythreejointdispatchparticipantscurrently,theservicewasdesignedtobeopenaccesssothatanyentityinPSCo’sbalancingauthoritycouldparticipate.FERCapprovedoftheserviceinFebruary2016.43

Jointdispatchserviceisanintra-hourbalancingservicethatpoolstogetheralltheparticipatingentities’electedgenerationresources44(includingmarketpurchases)anddispatchestheminmeritordertomeetthecombinedentities’load(excludingsalesassociatedwithnon-nativeload).45Themotivationbehindthejointdispatchservicewasthecostsavingsassociatedwithdispatchingthecombinedgenerationresourcesofallparticipatingutilitiestomeetthecombinedloadforintra-hourbalancing(seeFigure

37http://programs.dsireusa.org/system/program/detail/13338http://nawindpower.com/online/issues/NAW1412/FEAT_01_Inside-Colorado-s-Wind-Integration-Success-Story.html39Ibid.40FERC(2016).41Xcel(2015).42OATTswerearequirementofFERCOrder888forutility’stoprovideopenaccesstotheirtransmissionsystemtoallcustomersthatrequestedservice.OATTslistthetypesoftransmissionservicetheutilityprovides(e.g.,network,pointtopoint,conditionalfirm,jointdispatch).43FERC(2016).44ElectedgenerationareresourcesthatparticipantsdesignateasdispatchableonanhourlybasisandcanbedispatchedbyPSCoforjointdispatchservicesinreal-time.45Nativeloadarecustomerstheutilityisobligatedtoserve.

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7).46Jointdispatchcustomersarepaid,orpay,thecostbasedmarginalclearingprice47ofPSCo’sjointdispatchforanyintra-hourimbalances.Theservicerequiresthateachparticipatingmember(typicallyautility)commitsenoughresourcestomeetitsownhourlyloadrequirements.48Inaddition,jointdispatchtransactionscanonlyoccuronanyunusedavailabletransmissioncapacity,whichensuresthatcustomersthathaveexistingrightsontransmissionfacilitiesarenotimpactedbyjointdispatchservice.49Keyhighlightsfromjointdispatchserviceinclude:

• Nochangesinsystemoperationsuntilthestartofthehour(e.g.,nochangesinunitcommitment,bilateralcontractarrangements).

• Participantsdesignatewhichoftheirgeneratorstheywouldliketobeconsidered“dispatchable”injointdispatchserviceatthebeginningofeachhour.

• PSCodispatcheselectedgenerationinmeritordertohandlesystemimbalancesinreal-time.• Real-timedispatchresultsinloweroverallsystemimbalancecostrelativetoasysteminwhich

PSCo,astheimbalanceserviceproviderforalltransmissioncustomers,coulddispatchitsowngenerationinreal-timetohandlesystemimbalances.

• Settlementpriceisbasedonthesystemmarginalcost,whichisequivalenttotheincrementalcostofthenexteconomicmegawattofpowerthatcouldbedispatchedunderjointdispatchservice.

ThejointdispatchserviceisanincrementalsteptowardsmarketbasedsolutionsfortheelectricitysectorinColorado,whichhasnotparticipatedincentralizedmarketstodate.InitsfilingtoFERC,PSCoestimatedsavingsofjointdispatchintherangeof$7.7millionin2015.50PSCoalsostatedthattheotherparticipatingutilities,PRPAandBHCE,didnothaveexperiencewithcentralizedmarketsbeforeandtheirparticipationinthejointdispatchservicewaspartlytogivethemexposureandcomforttomarketbasedmechanisms.51BecausethedevelopmentofjointdispatchservicewouldimpactPSCo’sretailrates,PSCoalsohadtofileforapprovalwiththeColoradostateregulatorforhowitwouldusethecostsavingsassociatedwithjointdispatch.52

PSCoandsixotherparties(seeFigure12formapofcombinedserviceterritory)arealsocurrentlyevaluatingthedevelopmentofasingletransmissiontariffacrosstheirserviceterritoriestoeliminate

46Xcel(2015).47CostsarecappedatthePSCo’scostbasedratesfiledatFERC.48Penaltiesareonlyappliedwhenparticipantsdonotcommitenoughdispatchableresourcestomeettheirhourlyenergyrequirementsordesignatetoomanyresourceswithlimitedflexibilitytodispatch.49Thisjointdispatchconceptdiffersfromtraditionalimbalanceenergyservice,whichisprovidedunderSchedule4inPSCo’sOATT.Traditionalimbalanceenergyservicecharges(orpays)tieredimbalancepenaltiestocustomersthatdeviatefromtheirschedules.Thesepenaltiesincreasethegreaterthedeviationandarepricedatapercentageoftheimbalanceenergy(MWh)timesPSCo’smarginalgenerationcostforthathour(dollarperMWh).TheimbalanceaccountingisdoneonacustomerbycustomerbasisandPSCoisonlyabletouseitsowngenerationresourcestoservetheimbalanceneedsofallitsnon-jointdispatchOATTcustomers’imbalances.50Xcel(2015).51Xcel(2015).52CoPUC(2016).

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“ratepancaking”–theadditionofmultipleutilities’transmissionwheelingratesasonemovespoweracrossthoseutilities’transmissionnetworks–throughtheMountainWestTransmissionGroup(MWTG).53Thisisinpartmotivatedbywantingtositerenewablesmoreoptimallyandreducingthewheelingchargesassociatedwithmovingrenewablepowerfromaneighboringjurisdiction’sterritory.54TheMWTGhasconductedacoststudytounderstandhowpotentialcostsofajointtariffcouldbeallocatedandisintheprocessofconductingaproductioncoststudytoestimatethebenefitsofmoreoptimaldispatchacrossMWTG’sterritorywithasingletariff.Theresultsoftheseevaluationsarelikelytobeusedinanyapplicationstofederalorstateregulatorsinmovingforwardwithdevelopingajointtariff.

Figure12:MWTGServiceTerritory55

Inadditiontoajointtariff,theMWTGisalsoevaluatingtheoptionofanRTO,recognizingthatithasbecomemoredifficulttooptimizetheefficiencyofthesystemwhilemaintainingreliabilityundertheever-changingrulesandregulationsassociatedwithoperatinganelectricsystem.56TheMWTGissuedrequestsforinformationfrommanyISOsandRTOsintheU.S.inMay2016tobetterunderstandthecostestimatesontransmissionservices,ancillaryservices,planningconcepts,interconnectionprocesses,andothertopics.ThisinformationwasusedtoassesswhetherMWTGshouldnotonlymovetowardsanRTOstructure,butalsotounderstandwhetheritshouldjoinanexistingmarketorcreateanewone.57InJanuary2017,MWTGannounceditwasformallyenteringdiscussionstopotentiallyjointheSouthwestPowerPool(SPP).53Ibid.54https://www.euci.com/mountain-west-transmission-group-pancakes-and-rtos/55Bailey(2016).56Bailey(2016).57Ibid.

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3.2.2.2 PacifiCorpPacifiCorpoperatedasaverticallyintegratedutilitywithoutparticipationincentralizedmarketsfromitsfoundingin1910,asPacificPower,untilrecently.58PacifiCorphadbeenparticipatingin,orfollowing,anumberofWesternU.S.regionalcoordinationeffortsthatexploredaccesstoflexibleresources,utilizationofexistingandnewtransmissionfacilities,anduseoftools,services,andproductstointegratevariablegenerationformanyyears.59Inaddition,PacifiCorp’sserviceterritory(seeFigure13)haslargegapsbetweentheeasternandwesternportionsoftheirsystem.Exploringenhancedcoordinationwithneighboringbalancingareaslikelyprovidedameanstounderstandinghowtoimproveoperationsacrossitsownbifurcatedserviceterritory.WhentheCAISOprovidedapublicproposalforanEIMin2012,leveragingtheCAISO’sexistingreal-timemarketsoftware,PacifiCorp’sinterestwaspiquedanditbecamethefirstentitytoformallyexploreanEIMwithCAISO.60

Figure13:PacifiCorp’sServiceTerritory61

TheEIMisareal-timeenergymarketdesignedtoallowbalancingauthoritiestotradeimbalanceenergywithinthehour—practicesareunchangeduptothestartofthehour.TheEIMsettleseveryfiveandfifteenminutesanduselocationalmarginalprices,whichmeansthatpricesaccountforthecostofcongestionandlossesatspecificlocationsonthesystemEIMparticipantsarestillresponsibleforthe

58https://www.PacifiCorp.com/about/co.html.59Ibid.60PacifiCorp(2014).61https://www.PacifiCorp.com/content/dam/PacifiCorp/doc/About_Us/Company_Overview/PC-10k-ServiceAreaMap-2016.pdf.

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reliabilityoftheirsystemsandtheschedulinganddispatchoftheirresourcesonaday-aheadandhour-aheadbasis.TheEIMrunsareal-timemarketoptimizationacrosstheEIMfootprint,removingtransmissionchargesintra-hourtocreateanoptimaldispatchwithinandacrossalltheparticipants’serviceterritories.ThetransitiontotheEIMwasmotivatedbythechangingelectricitysectorintheWesternU.S.which,atthetimeofPacifiCorp’sEIMevaluationin2013,hadrenewableportfoliostandardsinplacethatwereexpectedtoinstall60GWofrenewablesacrosstheWesternU.S.by2022.62Risingpenetrationsofsolarandwindgeneration,asdemonstratedbytheRPSpoliciesintheWesternU.S.,haveunderscoredtheneedformoreefficientenergyimbalancemechanismsbecauseofwindandsolarresources’greatervariabilityanduncertainty.63

DeterminingthevaluepropositionofaregionalcoordinationmechanismtoPacifiCorp’ssystemwasimportantbecauseanymechanismthatinvolvedpotentialchangestocustomers’rateswouldneedtobeapprovedbystateregulatorsineachofthesixstatesthatPacifiCorpoperated.Regulatorswouldneedtounderstandhowthemarketmechanismimpactedcustomercostsandsystemreliability,andgivetheirapprovalbeforePacifiCorpcouldentertheregionalmechanism.Inaddition,thecreationofanewwholesalemarketwouldrequireapprovalfromFERC.Todevelopthevalueproposition,PacifiCorpandCAISOcommissionedastudytoevaluatetheEIMin2013.64

PacifiCorp’sevaluationoftheEIMfocusedonchangestothefollowingfoursystemoperations:1)interregionaldispatchbetweenPacifiCorpandCAISO;2)intraregionaldispatchwithinPacifiCorp;3)flexibilityreserverequirementsinPacifiCorpandCAISO;and4)renewableenergycurtailmentintheCAISO.Thestudycomparedareferencecase,whichassumedcurrentschedulingandoperatingpractices,toanEIMcase,whereanEIMwasestablishedbetweenCAISOandPacifiCorp.65Figure14belowshowstheannualbenefitestimatebycategoryin2017undervarioustransfercapabilitiestobothCAISOandPacifiCorp,andFigure15showstheportionofbenefitsattributedtoPacifiCorp.

62E3(2013).63GEEnergy(2010).64E3(2013).65Thedispatchbenefitsarecalculatedusingproductionsimulationmodeling.ThePacificorpEIMstudyusedtheGridviewproductionsimulationmodelandsubsequentEIMstudieshaveusedPLEXOSandothercustommodels.

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Figure14:EIMEstimated2017BenefitstoCAISOandPacifiCorp

Figure15:LowandHighRangeofBenefitsAttributedtoPacifiCorpin2017underaPacifiCorp-CAISOEIM66

TheEIMbenefitstoPacifiCorprangedfromover$10millionto$54millionannually.WhencomparedtothecostofenteringtheEIM,whichwasestimatedtobeaone-timestartupcostofapproximately$3-$6million,whichcoversthecostofexpandingtheCAISO’smodelingandsystemstoincludePacifiCorp,andanannualcostof$2-$5millionperyear,whichcoverstheadministrativecostsofEIMoperations,thebenefitswerehigherthanthecostsinmostscenarios.Inaddition,entryandexittotheEIMwasvoluntary,aswasprovidingbidsforgenerators.Thesenon-bindingtermsandlowcostoftheEIMstart-upprovidedalowriskset-upforPacifiCorp’sentryintoacentralizedmarket.TheonlythingthatchangedforPacifiCorpwasitsreal-timeoperations;allpracticesremainunchangedupuntilthestartofthehour,whichmeantPacifiCorpwasstillincontrolofforecastingandschedulingforitsgenerationonaforwardbasisaswellasholdingtheirsystem’sneededoperatingreserves.

66E3(2013).

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PacifiCorpagreedtojointheCAISO’sEIMin2013andwentlivewiththeEIMinthefallof2014aftertheCAISOobtainedtariffapprovalfortheEIMfromFERC.67SincetheEIMwentlive,theCAISOhasreportedgrossbenefitsrelatedtotheEIMonaquarterlybasis.FollowingPacifiCorp’slead,anumberofotherutilitieshavejoinedtheEIM,withthecommittedmembersoftheEIMcurrentlycoveringoverhalftheWesternU.S.’load.68AsofQ32016,theCAISOestimated$114millionintotalbenefitssincethemarketwentlivein2014,with$15millionofbenefitsattributedtoPacifiCorpinQ32016alone,whichwashigherthanmostoftheannualbenefitestimatesfromtheEIMevaluation.69TheCAISOalsoestimatestheamountofreducedrenewablecurtailment,reducedflexibilityreserves,andcarbonsavingsattributabletotheEIMineachquarter.Thesequarterlyreportshelpregulators,EIMparticipants,andotherstakeholdersunderstandthedynamicsoftheEIMandwhetherthevaluepropositionsestimatedintheEIMevaluationsholdtrue.

ThesuccessoftheEIMforPacifiCorphasmotivatedittostudyfullparticipationinCAISOmarkets,includingparticipationinthedayaheadmarket.ThiswouldnotonlyoptimizedispatchacrossCAISO’sandPacifiCorp’sfootprintsonanintra-hourbasisasitdoesinanEIM,butitwouldalsooptimizeday-aheadunitcommitmentandconducthourlymeritorderdispatch.Inaddition,PacifiCorpwouldbesubjecttoparticipationintheCAISO’stransmissionplanningprocessandgovernance.Fortheevaluationoffullparticipation,thereareanumberofstakeholderprocessesinplacetoreviewissuessuchasregionalresourceadequacy,transmissionaccesscharges(TAC),andgovernance.

67FERC(2014).68https://www.caiso.com/Documents/EIMCompanyProfiles.pdf.69CAISOb(2016).

Summary:

• Higherpenetrationsofrenewables,alongwiththeavailabilityoflow-cost,low-riskregionalcoordinationsolutions,havefacilitatedrecentregionalcoordinationsuccessesintheWesternU.S.

• RegionalcoordinationsolutionsmustprovideopenaccessprovisionstobeapprovedbyFERCandmustshowbenefits,likelyintheformofsavingstocustomers,forstateregulatorapproval.

• Developmentofavaluepropositionisimportantfor:(1)internalevaluationforadoptingaregionalcoordinationmechanism;and(2)forexternalpurposessuchasregulatoryapprovalandstakeholderengagement.

• Thesuccessofincrementalregionalcoordinationefforts,likejointdispatchandEIMwhichdoesn’tchangeanystandardpracticeupuntilthestartofthehour,providesparticipantswithexposuretomarketbasedmechanismswhichcouldfacilitatelargerandmoretransformativeregionaleffortsinthefuture.

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3.2.3 IncreasingResourceFlexibility

Wholesaleenergymarketshaveputpressureoncoalplantstocompeteastherehasbeendownwardpressureexertedonenergypricesthroughlowerfuelcostsandexacerbatedbyincreasingpenetrationsofzerovariablecostenergysourceslikewindandsolar.IncreasingpenetrationsofrenewableenergyonelectricitysystemsthroughouttheU.S.inthelastdecadearelargelyduetorenewableenergypolicytargetsanddecliningrenewabletechnologycosts.Theseeconomicmarketsignalshaveledtoinvestmentstoincreaseflexibilityofexistingthermalgeneration.Thislandmarkchangeinthemakeupofthegenerationfleethasledtopowersystemflexibilitybecomingincreasinglyimportanttomaintainreliablesystemoperationsunderhighpenetrationsofrenewables.IntheU.S.,afairamountofresearchhasbeencompletedtounderstandtheimpactrenewableswillhaveonthelong-termadequacyofthegridtomeetoperationalchallengesposedbyrenewablesaswellastheeconomicsofdifferentflexibilitysolutions.

AsIndia’sgenerationfleetislargelymadeupofcoal,thereispotentialtolearnfrominternationalexperience,particularlyintheU.S.,WesternEurope,andChina,inoperatingcoalplantsinareaswithhighpenetrationsofrenewables.Inaddition,thereareanumberofmechanismsthatmightbeusedtoharnesstheflexibilityofthedemandside,whichcouldbeimplementedthroughtherightcombinationofincentivesandtechnologiestohelpintegraterenewables.Thereisagrowingconsensusthatfindingmechanismstomakeexistinggenerationandloadsmoreflexiblewillbealessexpensivesolutiontorenewableintegrationthanmakinglarger,capital-intensiveinvestmentsinflexiblegeneration,storage,ortransmission.Thissectionexploresexamplesofcoalplantflexibilityanddemand-sideflexibilityintheU.S.thatmaybeapplicableinanIndiancontext.

3.2.3.1 CoalPlantFlexibilityMostoftheU.S.coalgenerationfleetwasbuiltinaneraofverticallyintegratedutilitieswiththeexpectationthat,withlowvariablecosts,theplantswouldoperatethroughoutmostoftheyearinabaseloadpattern.However,themorerecenttransitiontowardsderegulatedmarketshasplacedcompetitivepressureoncoalplants,whichhavebeenforcedeithertocompeteonaneconomicbasisortoretire.Especiallyinthelowgas-priceenvironmentofthepastfewyears,thesecompetitivecircumstanceshavecontributedtotheretirementof18GWofcoalgeneratingcapacitybetween2015-16.70Forthoseplantsthatchoosetoremaininservice,makingprofitinacompetitivewholesalemarket

70https://morningconsult.com/2016/05/03/coal-plants-shutting-without-clean-power-plan/

KeyQuestions:

• WhatisdrivingtheneedforincreasedflexibilityintheU.S.?• WhatcanwelearnfromcoalplantcyclingexperienceintheU.S.?• Howwilldemand-sideprogramsneedtoevolveintheirdesigninresponsetoelectricsystems

withhigherpenetrationsofrenewables?

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hasprovidedanincentivetoexploremechanismsthatmightallowthemtooperatemoreflexiblyinordertoimprovetheirpositioninthemarket.

TheadditionofVREtotheelectricsystemtendstoreinforcetheincentivetocoalgeneratorstoimprovetheiroperatingflexibility–shouldtheychoosetoremainonline–fortworeasons:(1)higherpenetrationsofrenewablegenerationtendtosuppressmarketprices,whichlowerstheopportunitycostofshuttingdownduringperiodsoflowprices;and(2)wholesalepricestendtobecomeincreasinglyvolatilewithhigherpenetrationsofvariableenergy,whichincreasesthevalueofcyclingandrampingcapabilities.

Enablingflexibleoperationstherebyimprovesthecompetitivenessoftraditionallyinflexiblecoalgeneratorsunderhigherrenewablepenetrationswhilealsofacilitatestheefficientintegrationofhigherpenetrationsofrenewablegeneration.Severalrecentrenewableintegrationstudieshaveexaminedhowincreasedflexibilityfromcoalplantscontributestotheintegrationofincreasingpenetrationsofrenewablegeneration;forexample:

• TheWesternElectricityCoordinatingCouncil(WECC)andWesternInterstateEnergyBoard(WIEB)jointlycommissionedtheWesternInterconnectionFlexibilityAssessmentin2015toexaminetheneedforoperationalflexibilityathighrenewablepenetrations.Oneofthequestionsinvestigatedbythisstudywasthedegreetowhichincreasedcoalflexibility,namelyincreasedcycling,wouldreducetheneedtocurtailrenewablegenerationatapenetrationof40%renewables.Figure16illustratestheimpactofincreasedflexibilityofcoalplantoperationonrenewablecurtailmentintworegionsintheWesternU.S.Thisisduetoanumberofflexiblecoalunitsturningoffinthemiddleofthedaytoaccommodatesolarthatwouldotherwisebecurtailed.

• ThePJMInterconnectioncommissionedthePJMRenewableIntegrationStudyin2014tostudytheimpactsofrenewablepenetrationsbetween15-30%onthePJMsystem.Amongotherconclusions,thisstudyobservedincreasesinthefrequencyandmagnitudeofcoalplantcycling,particularlyat30%renewablepenetration.Whilethecostsofcyclingtothesystemaresmall,thecostofcyclingisalargeportionofindividualgeneratorrevenues.71

71GEEnergy(2014).

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Figure16:IllustrationofInflexibleversusFlexibleCoalOperationintheWesternU.S.,fromtheWesternInterconnectionFlexibilityAssessment72

Recognizingthepotentialbenefitsoftransitioningawayfromthebaseloadparadigmandoperatingcoalgeneratorsmoreflexibly,severalorganizationshaveconductedstudiestoexaminehowsuchimprovementsinflexibilitymightbeachieved.Ina2013reportbytheNationalRenewableEnergyLaboratory(NREL)called“FlexibleCoal:EvolutionfromBaseloadtoPeakingPlant”,ananonymouscoalplantdubbed“CGS”withmultipleunitsintheU.S.washighlightedforitsabilitytorunflexibly,despitebeingbuiltasabaseloadunitwhoseoutputwasexpectedtobeconstantovertime.73

TheCGSfacilitywasbuiltinthe1970swiththeexpectationofrunningatan80%annualcapacityfactor.Asmarketdynamicsevolved,firstwiththeintroductionofnuclearpowersoonafterCGScameonline,andlaterasacompetitivemarketemergedintheearly2000sinCGS’serviceterritory,CGS’generationwasreducedtoa50%annualcapacityfactorandtheplantwascycledsignificantly(turnedonandoffwithinaday).ThemainphysicalissueswithcyclingandoperatingatminimumloadforCGSandotherbaseloadcoalfacilitiesisthewearandtearonequipmentandthedegradationofplantheatrateduetodynamicoperations.74Toaddresstheimpactsofcycling,CGSmadephysicalmodificationsafteranevaluationofwhetherthemarketopportunitiesinthenextyearjustifiedthecostofthemodificationandreductionintheforcedoutagerateinwhichthemodificationresulted.Inadditiontothesephysical

72E3(2016).73NREL(2013).74“TheCostofCyclingCoalFiredPowerPlants”,http://large.stanford.edu/courses/2014/ph240/wolkoff1/docs/cyclingarticles.pdf

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modifications,plantoperatingprocedureswererevisedtofocusonlimitingtemperatureincreasesonplantstart-up,limitingtemperaturedropsonshutdownbymonitoringtemperatureonvariousparts,developingstringentinspectionprogramswithassociatedprocessesforrepair,andmostimportantly,trainingoftheoperatorstoreinforceskillsneededtoidentifytheimpactsofcycling.Thesechangescombinedresultedinsignificantflexibilityimprovements.Priortothesemodifications,CGSwouldnotrunlowerthan40%-50%ofitsratedcapacity(Pmin);withmodifications,theplantwasabletorunat19%ofitsratedcapacity(withinwindowsof2-6hours,theCGSownercouldfurtherreducegenerationto7%ofratedcapacity).Thisreductioninminimumgenerationof20%-30%fromstandardlevelsprovidesanexampleofhowindividualcoalfacilitiescouldrampdowninthemiddleofthedayornighttoaccommodatelargeamountsofwindandsolarratherthanshuttingdownthefacilityformultipledays.

WhiletheCGSplantpresentedintheNRELstudyisasingleexampleofacompletedtransitiontoaflexibleoperatingregime,itsexperienceisshapedbythesamecircumstancesthatfacemostoftheU.S.coalfleet:increasedcompetitivepressures,inpartduetoincreasingpenetrationsofrenewablegeneration,leadingtotheneedtoexploremeasurestoincreaseoperationalflexibilitytoremaincompetitive.Ultimately,thistransitiontoamoreflexibleandmoreresponsivegenerationfleetwilleasethechallengesofrenewableintegration.UtilitiesintheU.S.haveseensimilartransitionsinoperationsoftheircoalfacilities.PacifiCorprecentlyrecounted,duringtheUSAIDsponsoredtrainingtourtotheU.S.,thattheycouldoperatetheircoalfacilitiesat20%ofnameplatecapacitywithoutanyretrofits.ThistypeofoperationwasmotivatedbythefinancialsignaltheEIMprovidedtheirplants.CoalplantoperatorsacrossthecompanyarenowmotivatedtomaximizeplantprofitsbyanalyzingEIMpricesandhaveaccordinglyimprovedplantoperationstobecomemoreflexible.

TheU.S.experiencewithcoalplantflexibilityshowsthatpricesignalshavebeguntoharnesstheinherentflexibilityincoalplantsthatwasoncethoughttobetechnicallyinfeasible.SimilaremergenceofpricesignalsinIndia,throughregionalcoordinationmechanisms,markets,andregulations,canprovideincentivesforplantstooperatesimilarlyinIndia.

3.2.3.2 Demand-sideFlexibilityAnotherareaofinterestthathasreceivedincreasingattentioninthecontextofrenewableintegrationistheideaofincreasing“demand-sideflexibility”—thatis,theabilityofloadstoadjustinresponsetomarketsignalsandchangingsystemconditionsinordertohelpthesystembalancetheintermittencyofrenewablegeneration.Historically,therehasbeenlittleneedforsuchflexibilityfromthedemandside–demand-sideprogramshavetypicallyeitherfocusedonreducingpeakdemand(e.g.demandresponse,criticalpeakpricing)orreducingutilityloadinaggregate(e.g.energyefficiency)–butasthepenetrationofintermittentresourcesgrowandsupply-sidegenerationresourcesbecomeincreasinglyconstrainedintheflexibilityoftheiroperations,theideaofharvestingtheinnateflexibilityofloadshasattractedinterest.

Withthesechanges,regulators,utilities,operators,andmarketparticipantshavebeguntoconsiderexpandedoptionstofacilitatedemand-sideparticipation.Incontrasttotraditionaldemand-sideprogramsthatcanbecalledupononlyunderextremecircumstancestoreducepeak,programsthatchangethehourlyprofileofenergyconsumptiononaday-to-daybasismayoffermorevalueinthe

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futureastheshapeofnetloadschangewithgrowingrenewablepenetrations.Emergingtechnologies(e.g.storage,energymanagementsystems)couldoffercustomersnewmeansofdirectlycontrollingtheirconsumptionpatterns,eitherdirectlyorviaanaggregator.Atthesametime,newtypesofelectricloads(e.g.,electricvehicles)couldbewell-suitedtooffermoreflexibilitythantraditionalenduses.SeveralstatesintheU.S.,suchasNewYorkandHawai’i,areexploringdynamicretailtariffstotakeadvantageofdemand-sideflexibilityfromdistributedenergyresources.

ArecentstudybyLBNLandE3evaluatedthetypesofDRprogramsthatCaliforniamayneedasitmovestowardsahighrenewablefutureaswellasthesizeandcostoftheseresources.ItfoundthatshiftDR,DRthatshiftsdemandfromperiodsofhighdemandtoperiodsofrenewableovergenerationandavoidsorreducesramps,hadthemostopportunitytoprovidesystemlevelvalueatupto$600millionperyear.75Thevaluecomesfromusingadvancedcontroltechnologiestoshift~10%ofdailyenergywithintheday.Shiftingdemandtoperiodsofrenewableovergenerationwereespeciallyhighvaluebecauseitpreventedthecapitalcostofoverbuildingrenewablestoreplacecurtailedrenewablestomeetrenewablescomplianceobligations.Figure17belowillustrateshowashiftDRprogramwouldwork.

Figure17:IllustrationofShiftDRoperationsonahighovergenerationdayinCalifornia76

LBNL’sstudyidentifiedanumberofmechanismsthatcouldprovidethe“Shift”serviceshowninFigure17,includingchangestoHVACsetpoint,customersitedbatterystorage,industrialprocessscheduling,electricvehiclecharging,refrigeratedwarehousescheduling,andwaterpumpingprocessscheduling.Inadditiontotheadvancedcontroltechnologies,therearemoretraditionalDRoptions,suchasthermalenergystorage,buildingprecooling,andchangingpatternsofcombinedheatingandcoolinguse,which75LBNL(2016).76Ibid.

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couldprovidethesametypeofShiftDRservices.ThoughLBNL’sstudyfoundsignificantvalueforShiftDRresources,thereiscurrentlynomarketmechanismtocompensatesuchresourcesinCalifornia.Thisistrueofmanyjurisdictions:manymarketsarenotsetuptoallowthislevelofdemand-sideparticipation,nordoutilitieshaveprocurementprogramsfocusedonthesetypesofresources.

AhandfulofjurisdictionshaveimplementedDRprogramsthatenabledirectloadcontrolforcustomerendusessuchasheatingandcooling.InMaryland,forexample,utilitieshaveaccessto677,000customers’thermostats,centralairconditioning,andelectricheatpumps,whichitcancyclewhenthereareemergencyevents.77Inaddition,MarylandutilitieshaveseveraldynamicretailpricingprogramswhichitbidsintothePJMcapacitymarket.Theseprogramsclearedat379MWinPJM’scapacitymarketfor2018-19.Whilethesetypesofprogramsarecurrentlyusedtoreducesystempeak,theycouldbeincrementallyredesignedtobeutilizedinthecontextofrenewableintegrationasdiscussedabove.Asthepenetrationsofrenewablescontinuetoincrease,itislikelythatregulators,utilities,andoperatorswillcontinuetoexploresuchinnovativerolesforthedemand-side.

Inadditiontodemandsideprogramdesign,regulationshavealsoenabledtheopeningofmarketstodemandsideresources.Severalfederalregulationshavetriedtoremovebarriersfordemandsideresourcestoparticipateinwholesalemarkets,similartohowFERC’sopenaccessregulationsallowednon-discriminatoryaccesstothetransmissionsystemforallgenerators.FERCOrder755requiredwholesalemarketstocompensatetheprovisionoffrequencyregulationandremoveunduebiasinprocuringfrequencyregulation.Thepaymentisbasedontheservicetheyprovide,includingseparatepaymentsforcapacityandperformance.Thisenableddemandsideresources,likeadvanceddemandresponse,tobeabletorespondtoautomaticgenerationcontrol(AGC)signalsandbecompensatedforitsservices.Similarly,FERCOrder784reformedancillaryservicemarketsbyrequiringutilitiestoevaluatethespeedandaccuracyofregulationresourceswhentheutilitydeterminesitsreserverequirements,whichdemandsideresourcescanoftendobetterthantraditionalgenerators.

77PSCM(2016).

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3.2.4 ClarifyingRoles,Responsibilities,andAuthority

Thecleardelineationofroles,responsibilities,andauthorityamongthevariousentitiesinthepowersectoriscriticaltoefficientsystemoperationsandrenewableintegration.IntheU.S.,thisdelineationhasdevelopedwiththeevolutionoftheregulationoftheinterstateelectricsystem.Thissectiondiscussestheevolutionofrolesintheelectricsector,thedelineationofresponsibilitiesforforecasting,scheduling,andbalancingamongentitiesintheelectricsector,andhowregulatorsintheelectricsectorinteractwithentitiesinvolvedwithforecasting,scheduling,andbalancing.

AsdiscussedinSection3.2.1,therewasanevolutionofaccessforgeneratorsfrombeforethemid-1990stotoday.Priortothemid-1990s,FERChadlittlejurisdictionoveraverticallyintegratedutilityoutsideofitsunbundledtransmissionrates.Stateregulatorshadthemostjurisdictionoververticallyintegratedutilitiesduringthistime,overseeingtheutility’sretailrates,maintenanceofsystemreliability,facilitationofpublicpolicygoals,andtheinvestmentclimateinwhichtheutilityparticipated.WiththeriseofthirdpartygenerationthroughPURPA,however,openaccesstothetransmissionsystembecameincreasinglyimportant,andFERCissueditslandmarkOrder888in1996thatrequiredallutilitiestoprovideopenaccesstothetransmissionsystem,throughOATTs,toallpartiesthatrequestedtransmissionservice.Aspartofprovidingopenaccess,Order888requiredutilitiestofunctionallyunbundle,meaningthattheyhadto:1)taketransmissionserviceunderthesametarifftheyoffercustomers;2)haveseparateratesforwholesalegeneration,transmission,andancillaryservices;and3)

Summary:

• Literaturesuggeststhatfindingwaystomakeexistinggenerationandloadsmoreflexibleisalessexpensivewaytointegraterenewablesthaninvestmentsinnewflexiblegeneration,storage,ortransmission

• WholesaleenergymarketsintheU.S.haveprovidedeconomicsignalsforcoalplantstomodifytheiroperations,byeitherretiringormakingflexibilitymodifications,inresponsetodecliningenergypricesandchangingnetloadpatterns.

• TheU.S.haslimitedexperienceindemand-sideflexibilityoutsideofstandardpeakreductionmeasuresandenergyefficiency.Increasedpenetrationsofrenewableshaveattractedinterestindevelopingmoreflexibleloadprogramsassupply-sideresourceshavebecomeincreasinglyconstrainedintheflexibilityoftheiroperations.

• Demand-sideflexibilityprogramswillneedtoberedesignedtoaddressthenewconstraintsthatemergeinsystemswithhighpenetrationsofrenewables,suchasovergeneration.

KeyQuestions:

• Whydidtheroles,responsibilities,andauthorityforvariousentitiesdevelopthewaytheydidintheU.S.?

• Whoisresponsibleforforecasting,scheduling,andbalancingunderdifferentmarketstructures?

• Wheredoesthedivisionofjurisdictionexistbetweencentralandstateregulators?

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usethesameelectronicinformationthattransmissioncustomersusetogetinformationabouttheirtransmissionsystem.78Throughitspassage,Order888alsodefinedaroleforFERCtohavemorejurisdictionoverthetransmissionsystemascomparedtotheindustrypre-Order888.

Thefocusoncreatingalevelplayingfieldforutilityownedgenerationandthirdpartygenerationfacilitatedtheshifttowardscompetitivemarketsandobviatedaneedforanindependent,unbiasedgridoperator.WhiletheISOandRTOconceptnaturallygrewfromthelonghistoryofpowerpoolsintheU.S.,FERCfurtherencouragedthedevelopmentofRTOsandISOstoaddressthecontinuedneedforunduediscrimination,whichitrecognizedOrder888alonedidnotfullyaddress.79AsRTOsandISOshavegrownintheU.S.overthelastdecade(largelyoutsidetheWesternU.S.),FERC’sroleasaregulatorhasalsogrownbecauseitishasjurisdictionoverthesewholesaleenergymarkets.Whilestatesdon’thavedirectregulatoryauthorityoverISOsandRTOs,theyoftenbringanycomplaintsorcasesdirectlytoFERCwhentheybelieveanenergymarketisn’toperatingasitshould.

AsdescribedinSection3.2.2,effortstodevelopcompetitiveregionalmarketsoutsideoftheCAISOfailedmanytimesoverintheWesternU.S.foramultitudeofreasons.Tothisday,manyutilitiesintheWesternU.S.continuetooperatetheirtransmissionsystemunderfunctionalunbundlingandOrder888compliantOATTs.AsnotedinSection3.2.2,however,thereisanewfoundinterestinregionalmarketbasedmechanismsintheWesternU.S.DependingonhowfaralongthespectrumofregionalcoordinationutilitiesintheWesternU.S.move(seeFigure11),thedelineationofroles,responsibilities,andauthorityarecededtovaryingextentsfromtheutilitytosystemoperator,particularlyinthecontextofforecasting,scheduling,andbalancingofgeneration.

Table7belowillustratestheentitiesresponsibleforforecasting,scheduling,andbalancing,andotherelectricsectorservices,undervariouslevelsofregionalcoordination,drawingonthecasestudiesinSection3.2.2.Forthepurposeofthisdiscussion,theutilityforeachofthescenariosisdenotedinthesecondrowofthetable,andforecastingismeanttorepresenttheforecastingofloadsandgenerationonatimescaleofaweekaheadtoreal-timebasis,ratherthanlonger-term(monthahead).ResourceadequacyinTable7referstotheresponsibilityofensuringthereisenoughcapacityonthesystemtomeetthesystemload.

Table7:AllocationofRolesandResponsibilitiesAcrossRegionalCoordinationMechanisms

Utilitynotparticipatingincentralizedmarkets

Utilityparticipatinginajointdispatchservice

UtilityparticipatinginCAISOEIM

UtilityfullparticipationinCAISOday-aheadandreal-timemarkets

ExampleUtilityPSCoandPacifiCorppriortojointdispatchserviceandEIM

PSCo PacifiCorp(currently) PacifiCorp(future)

Forecasting PSCo/PacifiCorp PSCo PacifiCorp CAISO

78FERC(1996).79FERC(2005).

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responsibility

Schedulingresponsibility PSCo/PacifiCorp PSCo PacifiCorp

Utilityprovidesself-schedulesandgeneratoravailability,CAISOdispatches

Balancingresponsibility PSCo/PacifiCorp

Jointdispatchserviceoperator(PSCo)

EIMoperator(CAISO)

Day-aheadandreal-timemarketoperator(CAISO)

Transmissionplanningresponsibility

PSCo/PacifiCorp PSCo PacifiCorp CAISO

Resourceadequacyresponsibility

PSCo/PacifiCorp PSCo PacifiCorp PacifiCorp

AsillustratedinTable7,thelevelofregionalcoordinationincreases(becomesmorecentralized)asonemovesfromnoparticipationincentralizedmarketstofullparticipationinday-aheadandreal-timemarkets(lefttoright).Asthelevelofregionalcoordinationincreases,themoreutilitiescedetheirauthorityinforecasting,scheduling,andbalancingtothemarketoperator.Theexistenceofcentralizedday-aheadandreal-timemarkets,however,doesnotprecludeutilitiesfromengaginginbilateralcontracts,whichprovidepricecertaintyfortheirpowerpurchases.Bilateralcontractsareoftenhedgedinmarketsthroughcontractsfordifferencesor,inareaswithnodalpricing,financialtransmissionrights.

Inacasewithautilitythatdoesnotparticipateinanycentralizedmarket,theutilityisrequiredtoperformalltheservicesofforecasting,scheduling,balancing,andotherplanningprocessessuchastransmissionplanningandresourceadequacyplanning.InajointdispatchorEIMscenario,theutilityisresponsibleforallservicesrequiredpriortothestartofthehour,suchasloadandgenerationforecasting,dayaheadunitcommitment,andhouraheaddispatch.Theintra-hourbalancinginthejointdispatchandEIMscenariosarehandledbythemarketoperator.Thisisthefirstinstanceofautilitycedingresponsibilitytoanotherpartyalongtheregionalcoordinationspectrum.Movingevenfurtheronthespectrumofregionalcoordinationtofullparticipationinday-aheadandreal-timemarkets,utilitiescedealmostalloftheirforecasting,scheduling,andbalancingauthoritytothemarketoperator.ThismayprovideinsightintowhytheWesternU.S.hashadsuccesswiththeregionalcoordinationmechanismsinthemiddleofthespectrum–jointdispatchserviceandEIM–asutilitieshavehadtocedetheleastamountofresponsibility.

Thetimeittakesforregionalcoordinationmechanismstobeimplemented,andfortransitionofresponsibilities,variesdependingonthelevelofregionalcoordinationandtheabilitytoleverageexistingsoftware,marketdesign,governancesystems,andgeneralinstitutionalthinkingaroundwholesalemarkets.TheWesternEIM,forexample,tookalittlelessthantwoyearstogolivein2014fromitsevaluationin2013.80ThespeedwithwhichthiswaspossiblecanbeattributedtoCAISO’s80PacifiCorp(2015).

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existingreal-timemarketsoftware,marketdesign,governanceprinciples,andOATTlanguage.TheMISOmarket,ontheotherhand,tookaboutfourtofiveyearstodevelopitsDay1market,whichcoveredtariffdesign,redispatchforcongestionrelief,ancillaryservices,andtransmissionplanning.Fromthere,ittookanotherthreeyearstomovetocompetitiveenergymarkets,andanotherfouryearstodevelopanancillaryservicesmarket.81BecauseMISOwasdevelopingtheirknowledgebasearoundthisforthefirsttime,thetransitionprocesstookmuchlongerthantheCAISO’sEIM,whereCAISOwasalreadyoperatingareal-timemarket.Thesetwoexamplesillustratethatthereisnosimpletransitionprocessforregionalcoordinationmechanisms,andthatitishighlydependentontheabilitytoleverageexistingtoolsknowledge.

TheprocessofcedingauthoritytothesystemoperatorisrootedinthegovernancesystemsofISOsandRTOs.GovernancedefinesthemattersthatISOsandRTOshavejurisdictionoververyclearly.Inatransitionperiod,thegovernancesystemcandefinehowthetransitionwillhappen.Forexample,theCAISOhasbeenworkingonaproposalofgovernanceprinciplesforaregionalISO,shouldPacifiCorpbecomeafullmember.Theproposalincludesthefollowingprinciples.82

• Preservationofstateauthority–thisprovidesthedelineationbetweenfederalandstateregulatoryauthorityinthecontextwhattheregionalISOdoesnothavejurisdictionover.ThedocumentincludesexamplesofareastheCAISOwillnotbeinvolvedin,suchasretailratemakingandpermittingapprovalsforhighvoltagetransmissionlines,whichsquarelyfallunderstates’jurisdiction.

• Transmissionownerwithdrawal–providestherightofanyparticipatingtransmissionownertowithdrawfromtheISO

• Transitionalcommitteeofstakeholdersandstaterepresentatives–developsacommitteemadeupofonepublicofficialfromeachstateintheISOfootprint,aswellasmembersfromacrossthespectrumofstakeholders(e.g.,utilities,generators,publicinterestgroups),tooverseegovernanceoftheISOduringthetransitionperiod

• Transitionperiod–outlineshowthecurrentCAISOboardwilltransitiontoaregionalISOboardthatIsmadeupthroughanewnominationandappointmentmethod

• CompositionandselectionofregionalISOboard–definesthenewnominationandappointmentmethodforaregionalISOboardmember

• EstablishmentofaWesternStatesCommittee–thisoutlinesthepurviewofanewcommitteethatgathersinputandfeedbackonissuesthatareofinteresttoallstatesintheregionalISOfootprint.

• Stakeholderprocessesandstakeholderparticipation–reviewstakeholderprocesstoensurewideparticipationanddiscussmeansandmethodsthatwouldfacilitatethis.

• Requirementsforplantobecomeeffective,includingGovernor’scertification–definestheapprovalsrequiredfromvariousbodiesandregulatorstohavethegovernanceplanbecomeeffective.

81https://www.misoenergy.org/AboutUs/History/Pages/History.aspx.82CAISO(2016a).

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ThefirstprincipleclearlydrawsthelinebetweenwhatstateregulatorshaveauthorityoverandwhatISO,andbyextensionFERC,haveauthorityover.Thetransitionprinciplesareimportantbecausetheysettheexpectationsfornewmarketparticipantsastowhatisexpectedduringthemarkettransitionandhowissuescanberesolvedduringthetransition.Similarly,theappointmentofboardmemberswhooverseetheISOneedstobeaclearlydefinedprocesssothatthemotivationsbehinddecisionmakingareindependentandtransparent.

AnotherkeyfeatureofISOsandRTOsisthattheyareaffordedasignificantamountoflatitudetoproblemsolve.ThisresponsibilitycomesfromthefactthatISOsandRTOshavestronggoverningprinciplesthatensurethatthereisasystemofchecksandbalancesshouldsomethingnotworkproperly.JointdispatchserviceandtheWesternEIMaretwoexamplesofthiscreativeproblemsolving,whereFERCreviewedproposals,ratherthanprescribestandardregulatoryframeworkstofollow.

Summary:

• FERCaccessencouragedtheformationandgrowthofISOsandRTOsbecauseOrder888didn’tremoveallincentivestoundulydiscriminateagainstthirdpartygenerators.

• Thereisaspectrumofregionalcoordinationmechanismsdiscussedthateachhavetheirowndelineationofrolesandresponsibilitiesforforecasting,scheduling,andbalancing.Fullparticipationinday-aheadandreal-timemarketsmovesmostoftheforecasting,scheduling,andbalancingrequirementstothesystemoperator.JointdispatchserviceandtheEIMmovethebalancingservicetothesystemoperator.

• Federalregulatorshavejurisdictionoverallwholesaleenergymarkets.Stateregulatorstypicallyhavejurisdictionoverretailrates.

• Systemoperatorshavebeengivenasignificantamountoflatitudetoproblemsolve.

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4 PriorityAreasofU.S.ExperiencewithRelevanceforIndiaDrawingonthereviewsinSections2and3,aswellasdiscussionsduringastudytourofIndianregulatorstotheU.S.,83thissectionmapsrecentU.S.experiencewithrenewableenergyforecasting,scheduling,andbalancingtoanIndiancontext.WeprioritizeelementsofU.S.experiencethathavenearer-termrelevanceforIndia,focusingonregionalbalancingmechanisms.84

Althoughthefocusinthisprimerisonrenewableenergyforecasting,scheduling,andbalancing,regulationofrenewableenergypolicyhasimportantimplicationsforrenewableenergyschedulingandbalancing(seeSections2.3and3.2.1).InIndia,RPOenforcementisanimportanttoolforsupportingthecontinueddevelopmentofrenewableenergy.Theregionalbalancingmechanismsdescribedinthissectioncanencourageefficientbalancingandeconomicdispatch,andmoreutilizationofrenewableenergy.However,itisworthnotingthatregionalbalancingmechanismsalonemaynotsupportnewinvestmentsinrenewableenergy;otherenablingpolicies,suchasenforcementofRPOpolicies,mayberequiredforthatobjective(seeSection3.2.1).

AsdescribedinSection3,centralizedregionalbalancingmarketsareanimportantrecentdevelopmentintheWesternU.S..Centralizedregionalbalancingisprovidingalow-cost,low-riskmechanismforutilitiesintheWesttoefficientlybalancehigherpenetrationsofvariablerenewablegeneration.

• Centralizedreferstothefactthatasystemoperatorcentrallydispatchesgeneratingunits;• Regionalreferstofactthatthesystemoperatorcentrallydispatchesgeneratingunitsover

multiplebalancingareaauthorityfootprints;• Balancingreferstothefactthatthecentralregionaldispatchislimitedtointra-hourtimescales,

orequivalentlytoredispatchfromanhour-aheadschedule.

Thisdefinitionof‘balancing’isintentionallybroad.Itonlyrequiresthatbalancing,whichoccursaftergateclosure,bedistinguishedfromday-aheadandintra-dayschedulingofloadsandgeneration.Ifhour-aheadloadsandgenerationschedulesalreadyreplicatethesolutionfromasystem-wideleast-costoptimization,onlydeviationsfromschedulesduetoforecasterror(loads,wind,solar,run-of-riverhydro)oroutages(generators,transmissionequipment)arebalanced.Ifhour-aheadschedulesdonotreflectthisleast-costsystem-widesolution,asmaybethecaseinitiallyifmultiplebalancingareascreateacommonbalancingmechanism,balancingmayalsoencompassre-dispatchofgenerationforeconomicreasons,ratherthansimplytoaddressimbalances.

InIndia,centralizedregionalbalancingwouldlikelyimplyataminimumthatPOSOCOandtheRLDCs(“centralized”)conducteconomicdispatchofgenerationacrossstates(“regional”)withinthehour(“balancing”).Beyondthis,thereareseveraldifferentavenuesforhowcentralizedregionalbalancingmightbeimplementedinIndia,discussedbelow.

83Aspartofthisproject,agroupofdelegatesfromcentralandstateregulatoryagenciesvisitedtheWesternU.S.inFebruary2017.84Regionalbalancingisasubsetofregionalcoordinationinpowersystemoperations.Inthissection,wefocusonintra-hourbalancing,ontimescalesof5minutestoaround70minutes(gateclosure)beforetheoperatinghour.Wedonotfocusonlonger-term(hour-aheadandlonger)generationandtransmissionschedulingandshorter-termancillaryservices(e.g.,sub-5-minutefrequencyregulation).

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IntheWesternU.S.,centralizedregionalbalancingisaddressingseveralchallengesassociatedwithrisingpenetrationsofvariablerenewablegeneration.Itisenabling:

• Moreefficientmanagementofwindandsolarvariabilityanduncertainty—byaggregatingrenewablegenerationacrossregions,regionalbalancingreducesintra-hourvariabilityandforecastuncertaintyforwindandsolargeneration.

• Moreefficientuseofthermalandhydropowergeneration—alargerpoolofthermalandhydropowergenerationenablestheseresourcestobeusedmoreefficientlyforbalancingonanintra-hourtimescale.

• Moreefficientsignalsforrenewablecurtailment—throughmarginalcost-basedregionaldispatch,systemoperatorscanmoreeconomicallymanagegridcongestion.

• Clearerincentivesforcoalandloadflexibility—throughmarginalcost-basedpricing,coalunitsandloadscanreceiveclearereconomicsignalstoprovideflexibility.

Inotherwords,centralizedregionalbalancingtouchesonallfourofthepriorityareasinthisprimer—economicdispatch,regionalcoordination,coalandloadflexibility,andchangesinroles,responsibilities,andauthority.

CentralizedregionalbalancingcouldprovidesimilarbenefitsinIndia.Ascertainingthemagnitudeandstate-to-stateallocationofthesepotentialbenefitswouldrequirefurtherexploration.Similarly,regulators,loaddispatchcenters,anddiscomswouldneedtoexploreandassesspotentialavenuesforthedesignandimplementationofacentralizedregionalbalancingmechanism.

Theremainderofthissectionexamines:(1)keyinsights,orlessonslearned,fromthecreationandimplementationofcentralizedregionalbalancingmechanismsintheWesternU.S.,aswellasadditionalinsightsfromthestudytour;(2)potentialimplementationconsiderationsforIndia,bywalkingthroughhowPSCo’sjointdispatchservicemightbeimplementedinIndia;and(3)designconsiderationsforcentralizedregionalbalancingmechanisms,basedonWesternU.S.experience.

WeselectedPSCo’sjointdispatchserviceasthebasisfortheexamplein(2),becausejointdispatchrepresentsakindofbalancingmechanismthatcouldbemorereadilyimplementedintheIndiancontext.Forinstance,jointdispatchdoesnotrequirethepre-existenceofabid-basedreal-timemarket,aswouldanEIM.AsinPSCo,jointdispatchcouldbeabridgetoamorecomplexreal-timemarket.

4.1 KeyInsightsfromtheU.S.ThissectionidentifieskeyinsightsfromthedevelopmentoftheEIMandjointdispatch(Section3.2.2)thatwebelievearemostrelevanttoanIndiancontext.Inaddition,itidentifiesanddiscussesadditionalinsightsfromthestudytourthatarerelevanttothebroaderthemesdiscussedinthisprimerandtoUSAID’sGreeningtheGridprogram.

4.1.1 InsightsandConsiderationsforRegionalCoordinationinIndiaMultipleapproachestocentralizedregionalbalancingarepossible.ThedifferentdesignsfortheEIMandjointdispatchillustratethattherearemultipleapproachestocentralizedregionalbalancing.Thereis,inotherwords,no“standard”model.Differentapproachesaresuitedtodifferentcontextsandhavedifferentincrementalinstitutionalandorganizationalrequirements.Forinstance,theEIMisanextensionoftheCAISO’spre-existingbid-based,real-timenodalmarket,whereasjointdispatchisa

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simpler,incrementalalternativebettersuitedtoPSCo’sinitialconditions.InIndia,acentralizedregionalbalancingmechanismcouldlookverydifferentthaneithertheEIMorjointdispatch.

Broadstakeholderengagementandclearvaluepropositionsareimportantforcreatingconsensus.ForboththeEIMandjointdispatch,CAISOandPSCoundertookdetailedvaluepropositionstudiestobetterunderstandthebenefitsandcoststodifferentparticipants.Thesestudieswerethensharedwithregulatorsandotherstakeholderstocreatetheconsensusneededtomoveforwardwithdesignandimplementation.Inaddition,thesestudiescanserveasabenchmarktoevaluatethemechanism’sactualperformance.BoththeEIMandjointdispatchcaseshighlighttheneedtoengagewithabroadrangeofpotentiallyaffectedstakeholders,suchastransmissionrightsholders,ratherthanlimitingengagementtoparticipatingutilities.

Regionalbalancingcanbealow-cost,low-risksteptowarddeeperregionalcoordination.AkeyaspectofboththeEIMandjointdispatcharethattheyonlyusescheduledgenerationcapacityandunusedtransmissioncapacity.Asaresult,participantsdonotneedtonegotiatehowtosharefixedcostsorrenegotiateexistinggenerationcontracts,andtheeffortrequiredfornewparticipantstojoinisrelativelysmall.AlthoughthisalsomeansthatEIMandjointdispatchbenefitsarerelativelysmallasashareoftotaloperatingcosts,thebenefitsofregionalbalancingextendbeyondreal-timebalancing.EIMparticipants,forinstance,fullyexpectedthatparticipationintheEIMwouldhelptoimprovetheefficiencyofgeneratorscheduling,transmissionuse,andinvestmentdecisions.TheEIMalsolaidthegroundworkfordiscussionsonPacifiCorp’sparticipationintheCAISOasafullmember,throughwhichitwouldparticipateintheCAISO’sday-aheadmarketandtransmissionplanningprocess.

Pillarsforsuccessfulimplementationincludevoluntarydesigns,incrementalapproaches,informationprotections,andpilotprojects.Voluntarydesigns—allowingparticipants(utilities)toenterandexitattheirchoosinganddesignatingwhichgeneratingunitsshouldparticipate—caneaseparticipantconcernsoverhavingtocedesomedegreeofautonomyandcontrol.Incrementalapproaches—startingwithsmall,incrementalchangestoexistingpracticesandinstitutions—reducetheamountoflearningbyparticipantsandeaseconcernsoverinformationasymmetriesamongparticipants.Attentiontoprotectingparticipants’informationcaneaseconcernsovertheconfidentialityofcommercially-sensitiveinformation.Provingouttheconceptthroughapilotproject,suchascreatingaregionalbalancingmechanismacrossalimitedgeographicscope,suchasafewstatesinIndia,cantesttheefficiencygainsfromabroaderbalancingarea.Thisexperiencecanprovideaplatformoflearningforotherstatestotakeadvantageofshouldtheychoosetoexploreregionalbalancingmechanisms.

4.1.2 InsightsandConsiderationsforIntegrationofLargeScaleRenewablesinIndiaDispatchsoftwareandautomaticgenerationcontrol(AGC)canminimizesystemoperatingcostswhilemaximizingthevalueofrenewableenergy.SoftwarehasplayedanimportantroleineconomicdispatchintheU.S.ImplementingdispatchsoftwareinIndiacouldenableeconomicdispatchofboththermalandrenewableresources.Thesoftwarewouldperformmeritorderdispatchbasedonvariablecostandcurtailresourceswheneconomic.Compensationforcurtailedresourcescouldbeaddressedthroughcontractsthataresettledoutsidethemarket.TotestthevalueofdispatchsoftwareandAGCinIndia,apilotprojectthatimplementsdispatchsoftwareinastate,alongwithAGConseveralgenerators

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inthatstate,canshowthedispatchcostsavingsaswellasrenewableintegrationbenefits(intheformofreducedcurtailment)ofbeingabletomovetofasterandmoreeconomicdispatch.

Betterrenewableandloadforecastingcanalsoaidinimprovedsystemoperations.Reducingtheenergyimbalanceburden,throughbetterforecastingofloadandrenewableenergy,canalsohelpsystemoperatorsbetterintegraterenewablesandoperatethegrid.CentralizedforecastingatasystemoperatorlevelofbothrenewablesandloadintheU.S.hasgivensystemoperatorsmorevisibilityoverthereal-timenetloadneededtobeservedbythermalandhydropowerresources.Thisallowsoperatorstobetterscheduleanddispatchthermalandhydropowerresources.TherapidexpansionofrooftopsolarPVhascreatedoperationalchallengesforsystemoperatorsintheU.S.,duetotheirlimitedabilitytoforecastand“see”theseresources.InIndia,asrooftopsolarPVgrowsitisimportantthatpropermeteringandcommunicationtechnologyisbuiltintointerconnectionstandardssothatsystemoperatorshavebettervisibilityintonetloadsforbalancingpurposes.IntheU.S.,penaltiesonindependentsystemoperatorsandutilitiesforreliabilityviolations,suchasareacontrolerror(ACE)violations,provideanimportantincentiveforimprovedcentralizedforecasting.Thiskindofreliability-basedincentiveframeworkmaybeworthexaminingintheIndiancontext.

Coalplantoperatortraininghasresultedinincreasedplantflexibility.ThelargestimprovementstocoalplantflexibilitywereobtainedthroughtrainingofplantoperatorsinbothPacifiCorpandXcelEnergy.PacifiCorpfoundthatbyshowingthefinancialimplications(pricesignalsfromtheEIM)ofcertainoperationalpatternstocoalplantoperators,operatorsweremorelikelytothinkcreativelyonhowtoimproveprocessestoincreaseplantflexibilityandprofitability.PeerexchangesbetweenIndianplantoperatorsandU.S.plantoperatorscouldfacilitatethetransferofknowledgeonhowtoruncoalplantsinahighrenewablespowersystem.

4.2 ImplementationConsiderations,UsingIllustrativeExampleofJointDispatchMuchoftheinstitutionalfoundationforcentralizedregionalbalancinginIndiaalreadyexists.Forinstance,theAncillaryServicesOperationsRegulationenablesPOSOCOtodispatchcentralgenerationunitswithinthehouronameritorderbasistorespondtospecifiedevents.SLDCsalreadysubmithourlyloadforecastsandgeneratorschedulesinformationtoRLDCs.SomeoftheinstitutionalandorganizationalchangesrequiredtoimplementcentralizedregionalbalancinginIndiaarethusrelativelyminor,whereasotherswouldbemoresignificant.

TohelpilluminatethekindsofconsiderationsforimplementingcentralizedregionalbalancinginIndia,itisinstructivetothinkthroughhowPSCo’sjointdispatchservicemightbeimplementedataregionallevelinIndia.Thisexampleisforillustrativepurposesonly;itisnotintendedtobearecommendation.Asthenextsectiondescribes,thereareanumberofpotentialoptionsinthedesignofsuchacentralizedregionalbalancingmechanism.

Inthishypotheticalexample,allinterstategeneratorswouldparticipateinthebalancingpool.Powerplantownerswouldselectwhichoftheirintrastategeneratorswouldparticipate.AllparticipatingthermalgeneratorownerswouldregularlysubmitcostinformationtotheRLDCs,includingheatratecurvesandafuelprice,throughawebportal.ThisinformationwouldbethebasisoftheRLDC’sreal-timedispatch.

ThecurrentpracticeofSLDCandRDLCcoordinationwithrespecttoday-aheadschedulingonaday-aheadandintra-daybasiswouldcontinuelargelyintact.SLDCschedulescouldbe,butneednotbe,

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basedonameritorder,accordingtovariablecosts.SLDCswouldaggregatebalancedday-aheadloadandgeneratorschedulesfromschedulingentities—discoms,exchanges,thirdparties—andsubmitthesetotheRLDC.Throughouttheday,participantswouldsubmitrevisedschedulestotheSLDCs,basedonupdatedloadandrenewableenergyforecasts,short-termprocurement,andchangesingeneratorstatus.TheSLDCswouldthensubmittheseupdatedschedulestotheRLDConaregularbasis.Theseintra-dayschedulerevisionsmayrequirechangestocurrentpractice.

Aswithlonger-termandintra-daycontractinginPSCo,theroleofthepowerexchangesinfacilitatingday-aheadandintra-daytransactionswouldbeunaffected.Thatis,discomsandopenaccesscustomerscouldcontinuetousethepowerexchangestoprocurepowerandadjusttheirbalancedschedulesonaday-aheadandintra-daybasis.

Schedulingentitieswouldberequiredtosubmitbalancedhour-aheadschedules.Anhourbeforetheoperatinghour,nofurtherschedulerevisionswouldbepermitted.Figure18showsahigh-levelillustrationofthisschedulingandbalancingprocess.

Figure18.HypotheticalProcessforSchedulingandBalancingunderaCentralizedRegionalBalancingMechanisminIndia

Withinthehour,theRLDCwoulddispatchinterstateandparticipatingintrastategeneratorsinmeritorderevery15-minutestobalanceregionalgenerationandload.AswithPSCo’sjointdispatch,theRLDC’sdispatchwouldusesecurityconstrainedeconomicdispatch(SCED)softwareandanautomateddispatchsystem(ADS)integratedintoanenergymanagementsystem(EMS)tofacilitatedispatch.TheRLDC’sintra-hourdispatchcouldbelimitedtoleast-costbalancingofregionaldeviationsfromhour-aheadschedules,oritcouldencompassaleast-costoptimizationoftheentireregionalsystemasin

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PSCo.85TheRLDCwouldonlyuseavailabletransmissioncapacity,andnoadditionalchargeswouldbeassessedfortransmissionuse.Linelossesassociatedwithjointdispatchenergywouldbeassessedongeneratorsanddiscomsonthebasisofactualenergyflowsacrosstransmissionsystems.

ForinterstategeneratorsandparticipatingintrastategeneratorstheDSMframeworkwouldbereplacedbyacombinationofchargesandpaymentsthroughthecentralizedregionalbalancingmechanismandpenaltiesforunbalancedschedules.86Thatis,intra-hourdeviationsfromscheduleswouldbechargedorcompensatedatsystemmarginalcostandsettledona15-minutebasisthroughthebalancingmechanism.Schedulingentities—discoms,exchanges,third-parties—wouldpayapenaltyforunbalancedhour-aheadschedules.87ThispenaltywouldbebasedonsomemultipleoftheRLDC’sincrementalcosts.

Responsibilitiesforgridreliability,includingfrequencyregulationandcontingencymanagement,couldresidewiththeSLDCsorbesharedatanRLDClevel,asprovidedforintheAncillaryServicesOperationsRegulation.Ineithercase,unitsprovidingregulationorcontingencyreserveswouldbeidentifiedandscheduledbeforeanhour-aheadtimeframe.Thisapproachtoprovidingreserveswouldlikelyrequireanapproachtosettingreservelevelsonaday-aheadtimeframe,consistentwithaunitcommitmenttimehorizon.Ifreservesareprovidedregionally,itwouldalsolikelyrequireanallocationmechanismtoallocatereservecoststostates(e.g.,basedontheshareofregionalcoincidentpeak),aswellasasettlementplatformtocollectcostsfromloadsandusethemtopaygenerators.Thedeterminationandschedulingofreserveswouldbeseparatefromthecentralizedregionalbalancingmechanism.

Forthebalancingmechanism,settlementwouldbebasedon15-minutesystemmarginalcostanddeviationsfromschedules.Forinstance,ifadiscom’sreal-timeloadexceededitsscheduleby100MWonaverageduringanhour(four15-minuteblocks)whentheaveragesystemmarginalcostwas4Rs/kWh,thatdiscomwouldbechargedRs400,000.Thegeneratorprovidingtheadditional100MWhinthathourwouldbepaid4Rs/kWh,orRs400,000.TheRLDCwouldnolongerneedtomaintainaDSMpool.Settlementwouldbeautomatedandmaintainedinonlineaccounts,withone-weektotwo-weeksettlementperiods.AsinPSCo’sjointdispatch,therationaleforthis“netzero,”88software-basedapproachwouldbetosimplifyaccountingandsettlement.

Settlementatsystemmarginalcostwillcreateeconomictransfersamongstates,generators,andcustomers.Forinstance,considerasituationinwhichGujarathasa100MWreal-timedeviationfromschedulethatitwouldotherwisemeetwithanintrastate5Rs/kWhgenerator.Undertheregionalbalancingmechanism,forexample,50MWofthisdeviationmightbemetbya2Rs/kWhintrastategeneratorinMaharashtra,andtheremaining50MWmightbemetbya4Rs/kWhintrastategeneratorinMadhyaPradesh.Thesystemmarginalcostis4Rs/kWh.Gujaratpays200,000Rseachtogenerators

85Optimizationbasedondeviationsis,insomeways,moredifficulttoimplement.TheRLDCwouldneedtoidentifyeligiblekindsofscheduledeviationsforrenewableandconventionalgenerationtoincludeintheoptimizationconstraints.Deviationingenerationwouldbelimitedtoeligibledeviationsingenerationplusdeviationsinload.86Fornon-participatingintrastategeneratorsinstatesthathaveratifiedtheABT,theDSMframeworkcould,inprinciple,continuetoexistinparallel.However,thesecostsareunlikelytobe87Thispenaltycouldbeassessedongeneratorsarewell,basedonthedifferencebetweenaday-aheadscheduledquantityandanhour-aheadquantity.88“Netzero”implyingthatallbalancingchargestoonepartyarepaymentstoanotherparty.

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inMaharashtraandMadhyaPradesh,butcustomersinGujaratsaveRs100,000byavoidingtheneedtorunthe5Rs/kWhgenerator.ThegeneratorinMaharashtraearnsanetincomeofRs100,000.

Forwindandsolargeneration,deviationsfrom15-minuteforecastswouldbesettledatsystemmarginalcost.Theofftakersforthesecontracts(discoms,openaccesscustomers),whichsubmitwindandsolarforecastsaspartoftheirschedulingrequirementstoSLDCsorRLDCs,paychargesfordeviationbelowforecastorearnrevenuesfordeviationsaboveforecast.

Toensurethatparticipantsarenotgamingthisbalancingmechanismtoearnexcessiverents,CERCcapsthesystemmarginalpriceusinganadministrativelysetbenchmarkprice.CERCoverseesthemechanism,butbothCERCandSERCshavetheabilitytoexamineandauditsubmittedgeneratorcostinformationordispatchresults.

Thecornerstoneofaregionalcentralizedbalancingmechanismwouldbeawell-functioningsystemofscheduling,accounting,metering,andsettlement,asdescribedintheSAMASTreport.Forinstance,theabilitytoaccuratelymeasuredeviationsfromhour-aheadscheduleswouldrequireacomprehensivemeteringinfrastructure.Softwareandautomationwouldalsoplayanimportantroleinfacilitatingthisbalancingmechanism.SoftwarewouldbeusedfortheSCEDandautomatingdispatch.Itwouldbeusedtoautomateaccountingandsettlementforthebalancingmechanism.Remotemetering(telemetry)couldbeusedtomeasuregeneratoroutputinreal-timeforsettlementpurposes.

4.3 DesignConsiderationsThethoughtexperimentaboveisonlyintendedtobeillustrative.Atmanyofthestagesintheaboveexampletherearecompetingdesignchoices.Forinstance,participationcouldbevoluntaryormandatory.Additionally,settlementmightbebasedonshadowprices(systemmarginalcost)fromoptimizationsoftware,asintheaboveexample,onsubmittedgeneratorcosts,oronthebasisofsupplyanddemandbids.Thesedifferentoptionshavedifferentimplicationsfortheallocationofbenefitsandcosts.

Table8showsahigh-levelsummaryofpotentialdesignconsiderationsforacentralizedregionalbalancingmechanism.Thislistisintendedtobeillustrativeratherthanexhaustive.

Table8.PotentialDesignOptionsandTradeoffsforCentralizedRegionalBalancingMechanisms

AreaDesignOptionsandTradeoffs

Participationoptions Voluntary.Voluntaryparticipationcanbuildtrust,enableflexibility,andreducebarrierstoparticipation.

Mandatory.Mandatoryparticipationcanimproveliquidityandreducethepotentialformarketpower.

Softwareandcontrolrequirements

Lower.Lesssophisticatedsoftwarecanreduceleadtimeforsettingupmechanismandlearningrequirementsforsystemoperatorstaff.

Higher.SCED,EMS,andADScanreducetheneedformanualre-dispatchofunitsandfacilitatequickerdispatch.

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Degreeofcentralization Lower.Centralizedregionaldispatchisonlylimitedtoimbalancesfromhour-aheadschedules.

Higher.Centralizedregionaldispatchre-dispatchesallparticipating,scheduledunitstomeetdemandatleastcost.

Offerformat Cost-based.Cost-basedoffersprovidea“papertrail”thatcanbeaudited.

Bid-based.Bid-basedoffersaremoreflexibleandbetterreflectshort-termcostsandopportunitycosts.

Balancedschedulerequirement

Balanced.Reducestheriskofresourceinsufficiencyandthepotentialformarketpower.

Partiallybalanced.Providesmoreflexibilitytoloadservingentities.

Operatingreserves Decentralized.Participantscansecuretheirownregulationandcontingencyreservesandretainautonomyinsettingreservelevels.

Centralized.Participantscansharereservesandpoolreservesharingrequirements.

Balancingauthority Decentralized.Enablinglocalsystemoperatorstocontinuetoactasbalancingareaauthoritiesprovidesgreaterstateautonomyandcontrol.

Centralized.Centralizedreal-time(sub-5-minute)operationsmayincreasereliability.

Settlementmechanism Cost-based.Maylimitrentstoparticipatinggenerators.

Uniformclearingprice.Pricingandsavingsallocationmechanismaretransparent.

Dispatchandsettlementinterval

Longer.Simplertomanagedispatchandsettlementonlongertimeintervals.

Shorter.Dispatchandsettlementon15-minuteandshorterintervalsismoreefficient,particularlywithhigherwindandsolarpenetrations

U.S.experiencehasshownthatdesignchoicesareinmostcasescontextspecific.TheEIMandjointdispatch,forinstance,seektoachievesimilargoals,butwithverydifferentdesignsthatstemfromdifferentinitialconditions.Inpractice,designchoicesmustbalanceefficiency,implementationcost,effectiveness,fairness,andotherstakeholderconcerns.AsevidencedbynearlytwodecadesofexperienceinU.S.RTO/ISOmarkets,mechanismdesignswillcontinuetoevolveovertime.

5 ReferencesBailey,Rodney.2016.MountainWestTransmissionGroup.Availableat:https://www.wapa.gov/About/the-source/Documents/2016/0928-MWTG-update.pdf.

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CaliforniaIndependentSystemOperator(CAISO).2010.IntegrationofRenewableResources:OperationalRequirementsandGenerationFleetCapabilityat20%RPS.Availableat:http://www.uwig.org/CAISO-20PercentRPS.pdf.

CaliforniaIndependentSystemOperator(CAISOa).2016.SecondRevisedProposalofPrinciplesforGovernanceofaRegionalISO.Availableat:https://www.caiso.com/Documents/PrinciplesForGovernanceofaRegionalISO-Clean.pdf.

CaliforniaIndependentSystemOperator(CAISOb).2016.WesternEIMBenefitsReportThirdQuarter2016.Availableat:http://www.caiso.com/Documents/ISO-EIMBenefitsReportQ3_2016.pdf.

CentralElectricityAuthority(CEA).2013.LargeScaleGridIntegrationofRenewableEnergySources-WayForward.Availableat:http://cea.nic.in/reports/others/ps/pspa1/large_scale_grid_integ.pdf.

CentralElectricityRegulatoryCommission(CERC).2016.DeviationSettlementMechanismandRelatedMatters(ThirdAmendment)Regulations.Availableat:http://www.cercind.gov.in/2016/regulation/SOR123.pdf.

CERC.2015a.ProposedFrameworkforForecasting,Scheduling&ImbalanceHandlingforRenewableEnergy(RE)GeneratingStationsBasedonWindandSolaratInter-StateLevel.Availableat:http://cercind.gov.in/2015/draft_reg/frame.pdf.

CERC.2015b.FrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources.Availableat:http://www.cercind.gov.in/2015/regulation/SOR7.pdf.

CERC.2015c.AncillaryServicesOperationsRegulations.Availableat:http://www.cercind.gov.in/2015/draft_reg/draft%20cerc%20ancillary%20services%20operations%20regulations.pdf.

CERC.2015d.DeviationSettlementMechanismandRelatedMatters(ThirdAmendment)Regulation.Availableat:http://www.cercind.gov.in/2015/draft_reg/Public_Notice2315.pdf.

CERC.2014.DeviationSettlementMechanismandRelatedMattersRegulation.Availableat:http://www.cercind.gov.in/2014/regulation/gaz132.pdf.

CERC.2010a.IndianElectricityGridCode.Availableat:http://cercind.gov.in/2010/ORDER/February2010/IEGC_Review_Proposal.pdf.

CERC.2010b.UnscheduledInterchangeChargesandRelatedMattersRegulations.Availableat:http://www.cercind.gov.in/Regulations/UI_Amendments_regulations_2010.pdf.

CERC.2004.OpenAccessinInter-stateTransmissionRegulations.Availableat:http://www.cercind.gov.in/31012004/finalregulations-openaccess.pdf.

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U.S.DepartmentofEnergy(DOE).2007.EconomicDispatchofElectricGenerationCapacity:AReporttoCongressandtheStatesPursuanttoSections1234and1832oftheEnergyPolicyActof2005.Washington,D.C.:U.S.DOE.Availableat:https://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/final_ED_03_01_07_rev2.pdf.

EnergyandEnvironmentalEconomics(E3).2013.PacifiCorp-ISOEnergyImbalanceMarketBenefits.SanFrancisco:E3.Availableat:https://www.caiso.com/Documents/PacifiCorp-ISOEnergyImbalanceMarketBenefits.pdf.

EnergyandEnvironmentalEconomics(E3).2016.WesternInterconnectionFlexibilityAssessment.SanFrancisco:E3.Availableat:https://www.wecc.biz/Administrative/E3_WECC_WIEB_FlexAssessment_2016-01-27.pdf.

EnerNexCorporation.2011.EasternWindIntegrationandTransmissionStudy:ExecutiveSummaryandProjectOverview.NREL/SR-5500-47086.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy11osti/47086.pdf.

FederalEnergyRegulatoryCommission(FERC).1996.PromotingWholesaleCompetitionThroughOpenAccessNon-discriminatoryTransmissionServicesbyPublicUtilities.Availableat:https://www.ferc.gov/legal/maj-ord-reg/land-docs/rm95-8-00w.txt.

FederalEnergyRegulatoryCommission(FERC).2014.OrderConditionallyProposedTariffRevisionstoImplementEnergyImbalanceMarket.Availableat:https://www.ferc.gov/whats-new/comm-meet/2014/061914/E-4.pdf.

FederalEnergyRegulatoryCommission(FERC).2016.OrderAcceptingJointDispatchAgreementandTariffRevisions.Availableat:https://www.ferc.gov/whats-new/comm-meet/2016/021816/E-5.pdf

ForumofRegulators(FOR).2015.ModelRegulationsonForecasting,SchedulingandDeviationSettlementofWindandSolarGeneratingStationsattheStateLevel.Availableat:http://www.forumofregulators.gov.in/Data/study/MR.pdf.

GEEnergy.2010.WesternWindandSolarIntegrationStudy:ExecutiveSummary.NREL/SR-550-47781.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy10osti/47781.pdf.

GEEnergy.2014.PJMRenewableIntegrationStudy.Availableat:http://www.pjm.com/committees-and-groups/subcommittees/irs/pris.aspx.

GIZ-India.2015.ReportonForecasting,ConceptofRenewableEnergyManagementCentresandGridBalancing.Berlin:GIZ.Availableat:http://mnre.gov.in/file-manager/UserFiles/draft-report-fscb-remcs.pdf.

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Heeter,Jenny,RaviVora,ShivaniMathur,PaolaMadrigal,SushantaK.Chatterjee,RakeshShah.2016.WheelingandBankingStrategiesforOptimalRenewableEnergyDeployment:InternationalExperiences.NREL/TP-6A20-65660.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy16osti/65660.pdf.

InternationalEnergyAgency(IEA).2015.IndiaEnergyOutlook.Paris:IEA/OECD.Availableat:http://www.worldenergyoutlook.org/media/weowebsite/2015/IndiaEnergyOutlook_WEO2015.pdf.

LawrenceBerkeleyNationalLaboratory(LBNL).2016.FinalReportonPhase2Results:2015CaliforniaDemandResponsePotentialStudy.Availableat:http://www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=6442451541

Loutan,Clyde.2016.“Briefingonusingrenewablestointegraterenewables.”PresentationattheBoardofGovernorsMeeting,December14-15.Availableat:http://www.caiso.com/Documents/Briefing_UsingRenewables_IncorporateRenewables-Presentation-Dec2016.pdf.

Mai,Trieu,DebraSandor,RyanWiser,andThomasSchneider.2012.RenewableElectricityFuturesStudy:ExecutiveSummary.NREL/TP-6A20-52409-ES.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy13osti/52409-ES.pdf.

Milligan,MichaelandBrendanKirby.2007.ImpactofBalancingAreasSize,ObligationSharing,andRampingCapabilityonWindIntegration.NREL/CP-500-41809.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy07osti/41809.pdf.

Milligan,Michael,BrendanKirby,andStephenBeuning.2010.CombiningBalancingAreas’Variability:ImpactsonWindIntegrationintheWesternInterconnection.NREL/CP-550-48249.Golden,CO:NREL.Availableonlineat:http://www.nrel.gov/docs/fy10osti/48249.pdf.

MinistryofPower(MoP).2016.ReportoftheTechnicalCommitteeonLargeScaleIntegrationofRenewableEnergy,NeedforBalancing,DeviationSettlementMechanism(DSM)andAssociatedIssues.NewDelhi:MoP.Availableat:http://powermin.nic.in/sites/default/files/uploads/Final_Consolidated_Report_RE_Technical_Committee.pdf.

NorthAmericanElectricReliabilityCorporation(NERC).2015.EssentialReliabilityServicesTaskForceMeasuresFrameworkReport.Atlanta:NERC.Availableonlineat:http://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdf.

NITI Aayog, CII, Shakti Foundation, and Regulatory Assistance Project (RAP). 2015. Report on India’sRenewable Electricity Roadmap. New Delhi: NITI Aayog. Available at:http://niti.gov.in/writereaddata/files/document_publication/Report_on_India%27s_RE_Roadmap_2030-full_report-web.pdf.

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PacifiCorp. 2014. Application for Deferred Accounting and Prudence Determination. Available at:https://www.pacificpower.net/content/dam/pacific_power/doc/About_Us/Rates_Regulation/Oregon/Regulatory_Filings/Docket_UM_1689/04-18-14_Application_and_Direct_Testimony/application/2_Application_EIM.pdf

PacifiCorp. 2015. Energy Imbalance Market Partnership. Available at:http://www.PacifiCorp.com/content/dam/PacifiCorp/doc/About_Us/Energy_Imbalance_Market/EnergyImbalanceMarketPartnershipFASTFACTS.pdf

Parsons, Brian, Michael Milligan, J Charles Smith, Edgar DeMeo, Brett Oakleaf, Kenneth Wolf, MattSchuerger, Robert Zavadil,MarkAhlstrom, andDora YenNakafuji. 2006.Grid Impacts ofWindPowerVariability: Recent Assessments from a Variety of Utilities in the United States. NREL/CP-500-39955.Golden,CO:NREL.Availableat:http://www.nrel.gov/docs/fy06osti/39955.pdf.

PublicServiceCommissionofMaryland(PSCM).2016.TheEmPOWERMarylandEnergyEfficiencyActStandardReportof2016.Availableat:http://www.psc.state.md.us/wp-content/uploads/2016-EmPOWER-Maryland-Energy-Efficiency-Act-Standard-Report.pdf.

PublicUtilitiesCommissionoftheStateofColorado(CoPUC).2016.RecommendedDecisionofALJManaL. Jennings-FaderGrantingApplication inPart,AddressingTreatmentof the JointDispatchAgreement,Ordering Accounting Treatment and Ordering Public Service to File Reports. Available at:https://www.dora.state.co.us/pls/efi/efi_p2_v2_demo.show_document?p_dms_document_id=854601&p_session_id=.

Rajasthan Electricity Regulatory Commission (RERC). 2016. RERC Forecasting, Scheduling, DeviationSettlement and Related Matters of Solar and Wind Generation Sources Regulations. Available at:http://rerc.rajasthan.gov.in/cnpl/PDFs/F&S%20Regulations.pdf.

Tamil Nadu Electricity Regulatory Commission (TNERC). 2016. Tamil Nadu Electricity RegulatoryCommission Forecasting, Scheduling, Deviation Settlement and Related Matters of Wind and SolarGeneration Sources Regulations. Available at:http://www.tnerc.gov.in/regulation/draft%20regulations/2016/Forecast-solar%2013-1-2016-Draft.pdf.

XcelEnergy(Xcel).2015.ProposedTariffRevisionsforJointDispatchTransmissionService.Availableat:https://www.xcelenergy.com/staticfiles/xe/PDF/Regulatory/10-30-2015-Joint-Dispatch-Service-Round-2-Filing.pdf.

XcelEnergy(Xcel).2016.OpenAccessTransmissionTariff.Availableat:http://www.oasis.oati.com/PSCO/PSCOdocs/Xcel-Energy_OATT_02-10-2016.pdf.

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6 Appendix:BackgroundonIndia’sElectricitySector,RenewableEnergyGoals,andInterstateRegulations

6.1 OrganizationofIndia’sElectricitySectorIndia’selectricitysectorencompassesalargeanddiversegroupofministries,regulators,gridoperators,andgeneratingcompanies.Atthenationallevel,theMinistryofPower(MoP)setsnationalelectricitypolicyandoverseestheoveralldevelopmentofthesector.WithinMoP,theCentralElectricityAuthority(CEA)advisesthecentralgovernmentonpolicy,planning,andtechnicalissuesandsetstechnicalstandards.TheMinistryofNonconventionalandRenewableEnergy(MNRE)isresponsibleforencouragingthedeploymentofrenewableenergy.

TheElectricityRegulatoryCommissionsAct(1998)createdindependentnationalandstateregulatorsfortheelectricitysector,whosepowersandfunctionsarespecifiedinthe2003ElectricityAct.Atthenationallevel,theCentralElectricityRegulatoryCommission(CERC)regulateslicensesandtariffsforgenerationandtransmissionusedininterstatepowerexchange,andadvisesthecentralgovernmentonarangeofpolicyissues.Atthestatelevel,StateElectricityRegulatoryCommissions(SERCs)regulatelicensing,wholesaleandretailtariffs,interconnection,andstandards.The2003ElectricityActcreatedanadditionalsetofplanningagencies,theRegionalPowerCommittees(RPCs),tofacilitatetheintegrationofregionalgrids.89

The2003ElectricityActestablishedamulti-tiersystemofstate,regional,andnationaldispatchcenters.TheActdesignatedStateLoadDispatchCenters(SLDCs)asbalancingareaauthorities,withresponsibilityformonitoringandcontrolofstateelectricitygrids.FiveRegionalLoadDispatchCenters(RLDCs)coordinateschedulingofgenerationandtransmissionbetweenstatesandmonitorregionalgridconditions.ANationalLoadDispatchCenter(NLDC)managesconnectionsamongregionalgridsandcoordinatesamongRLDCs.TheRLDCsandNLDCarepartofPowerSystemOperationCorporation,Ltd.(POSOCO),whichisasubsidiaryofPowerGridCorporationofIndia(POWERGRID).

Unlikemanyothercountriesofitssize,sinceDecember31,2013Indiahasanationalpowergridthatissynchronizedacrossregions—thatis,thefiveregionalgridsareconnectedintoanationalgridandoperateatasinglegridfrequency.Bytheendof2017,POWERGRIDanticipatesthatinterregionaltransmissioncapacitywillreach65gigawatts(GW),facilitatingsignificantpowerflowsacrossgridregions.90

Transmission,distribution,andgenerationinIndia’selectricitysectorisownedandoperatedbyamixofcentralgovernment,stategovernment,andprivatecorporations.Insomestates,gridcorporationscombinestatetransmissionutilities(STUs),distributioncompanies(discoms),andtheSLDC.Inotherstates,theseorganizationsareseparated.POWERGRID,thecentraltransmissionutility(CTU),ownsandoperatestheinterstatetransmissionsystem(ISTS).

89RPCfunctionsaredetailedintheIndianElectricGridCode(CERC,2010).90SeePOWERGRID,“OneNation-OneGrid,”http://www.powergridindia.com/_layouts/PowerGrid/User/ContentPage.aspx?PId=78&LangID=English.

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Generationownershipisdividedamongcentralgovernmentmajority-owned,91stategovernmentmajority-owned,andprivatesectorcompanies.AsFigure19shows,privateownershipaccountsforthelargestshare(41%)ofgenerationcapacity,followedbystates(34%),andthecentralgovernment(25%).Increasesinprivateownershiphavebeendriveninpartbytheexpansionofrenewableenergy,whichismostlyownedbytheprivatesector.

Figure19.Private,StateGovernment,andCentralGovernmentOwnershipofGenerationCapacitybyResourceType,201692

Generationthatisscheduledacrossstatesisgovernedbyinterstateregulations,whereasgenerationthatisonlyutilizedwithinstatesisgovernedbyintrastateregulations.Inpractice,interstategenerationcapacityisoftenownedbycentralgovernmentcorporationsandisallocatedacrossmultiplestates.Stategridcompanieshaverightstoschedulethatgenerationtomeetlocaldemand.

Indiahastwonationalpowerexchanges—theIndianEnergyExchange(IEX)andPowerExchangeIndiaLimited(PXIL)—bothofwhichwereestablishedin2008.Theseexchangesenableloadservingentities,traders,andgeneratorstomeetresidualneedsforpoweronanintra-day,day-ahead,andweeklybasis,andalsotraderenewableenergycredits(RECs).Theexchangescomplementlonger-andshorter-termover-the-counter(OTC)contracts.Thesebilateralandexchangemarketsarefacilitatedbynon-discriminatoryaccessrequirementsforinterstatetransmissionasstipulatedinCERC’s2004OpenAccessinInter-stateTransmissionRegulations.93

91CentralgovernmentfirmsincludetheNationalThermalPowerCorporationLimited(NTPC),theNationalHydroelectricPowerCorporation(NHPC),andtheNuclearPowerCorporationofIndiaLimited(NPCIL).92DataarefromCEA,http://www.cea.nic.in/reports/monthly/installedcapacity/2016/installed_capacity-03.pdf.93CERC(2004).

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Thermal Nuclear Hydro Renewables

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6.2 RenewableEnergyDevelopmentinIndiaRenewable energy, and particularly wind and solar energy, has the potential to play amajor role inIndia’senergymix.RenewablegenerationcapacityinIndiaissettorapidlyexpandoverthenextdecade,drivenbyaggressivenationalandstatetargets,declines incost,andalignmentwithdevelopmentandenergy security goals.94As in other countries, expansion and integration of renewable energy arepresentingnewchallengesinIndia.

India’s twomost plentiful renewable energy resources are wind and solar.Wind resource potential,estimatedatjustover300gigawatts(GW)at100-meterheight,isconcentratedinwesternandsouthernstates.95Solar resource potential, approximately estimated at 750 GW,96is more evenly distributedthroughout the country, though solar irradiance is generally higher in the western, southern, andnorthernmoststates.

94See,forinstance,IEA(2015).95DataarefromtheMinistryofNewandRenewableEnergy(MNRE),“Statewise%ofWindPotentialUtilized(Ason31.03.2016),”http://mnre.gov.in/file-manager/UserFiles/State-wise-wind-power-potential-utilized.pdf.EstimatesofwindpotentialinIndiavarysignificantly(IEA,2015).96ThisestimateisfromIndia’sNationalInstituteofSolarEnergy,citedfromIEA(2015).

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Figure20.IndiaWindandSolarResourceMaps97

In2015, renewableenergy—biomass, small-scalehydroelectric, solar,andwindenergy—generatedabout 6%of India’s total electricity.Windwas thedominant resource, accounting formore thanhalf(65%)oftotalrenewablegenerationcapacity(Figure21).Coal(76%)andlarge-scalehydropower(12%)remainthecountry’sdominantgenerationsources.

97Solarresourcemapisbasedonannualaverageglobalhorizontalirradiance,andisfromU.S.NationalRenewableEnergyLaboratory(NREL),“IndiaSolarResourceMaps&Data(updatedMarch2016),”http://www.nrel.gov/international/ra_india.html.WindresourcemapisfromtheIndianWindEnergyAssociation,www.inwea.org.

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Figure21.CompositionofIndia’sElectricityGenerationandRenewableEnergyGenerationCapacityin201598

In2015,theGovernmentofIndiasetatargetofinstalling175GWofrenewableenergynationwideby2022,including100GWofsolarenergy,60GWofwindenergy,10GWofbiomassenergy,and5GWofsmall-scalehydropower.Achievingthesetargetswouldmeanthatsolarandwindenergywouldaccountforaround20%ofIndia’stotalelectricitygenerationby2022.99

Thedevelopmentofrenewableresourcesthusfar,andtheanticipateddevelopmentofwindandsolarresourcestomeetthe2022goal,areconcentratedwithinstatesandgridregions.Fivestates—TamilNadu,Maharashtra, Gujarat, Andhra Pradesh, and Rajasthan— accounted for 71% of existing (as ofFebruary 2016) renewable generation capacity and are expected to account for 45% of new solarcapacityand76%ofnewwindcapacityby2022.100Onaregionalgridlevel,theWesternandSouthernGridaccount formore than90%ofexisting (February2016) renewablegenerationcapacityandmorethan 75%of anticipated solar andwind capacity additions by 2022 (Figure 22). This concentration ofsolarandwindresourcesimpliesthat,forrenewableenergytobecomealargerpartofIndia’snationalpowermix,deliveringpoweracrossstatesandregionswillbecomeincreasinglyimportant.

98GenerationmixdataarefromGoI,MoP,andCEA(2015).RenewablegenerationmixdataarefromGarud(undated).99Thishigh-levelestimateassumeselectricitygenerationgrowthof5%to7%peryearbetween2015and2022,andcapacityfactorsof20%forsolarenergyand30%forwindenergy,respectively.100ExistingrenewablecapacitydataarefromMoPandCEA(2016).ExpectedsolarandwinddataarefromMNRE,“TentativeState-wisebreak-upofRenewablePowertargettobeachievedbytheyear2022Sothatcumulativeachievementis1,75,000MW,”http://mnre.gov.in/file-manager/UserFiles/Tentative-State-wise-break-up-of-Renewable-Power-by-2022.pdf.

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Figure22.Existing(January2016)RenewableGenerationCapacityandNewSolarandWindGenerationCapacityAnticipatedby2022forIndia’sFiveGridRegions101

6.3 InterstateRegulationsforForecasting,Scheduling,andBalancingofRenewableEnergy

6.3.1 FrameworkforRenewableGenerationCERCdevelopedaninitialframeworkforrenewableenergyforecasting,scheduling,andbalancingintheRenewableRegulatoryFund(RRF),withinthe2010IndianElectricityGridCode(IEGC).102TheRRFsoughttostrikeabalancebetweenincentivizingsolarandwindgeneratorstoaccuratelyforecasttheiroutput,andlimitingthecommercialimpactsofimbalance—orinthiscaseforecasterror—chargesonthesegeneratorstoareasonablerange.

UndertheRRFmechanism,solarandwindgeneratorsmeetingfourcriteria—commissionedafterMay2010,aboveacertaininstalledcapacitythreshold,injectingpowerontothehighvoltagetransmissionsystem,anddeliveringpoweracrossstates—wererequiredtoprovideaforecastoftheirgenerationfor15-minutetimeintervalsduringthenextdaytoRLDCs.103Generatorswereallowedtorevisetheseschedulesuptoeighttimesineachthree-hourtimeblockbeginningfromthestartoftheday.

TheRRFlimitedthescopeofchargesorpaymentsfordeviationfromforecastedschedulestowindgenerators.Atthetime,windforecastsweredeemedtobemoreaccuratethansolarforecasts.CERCproposedthatday-aheadwindforecastsshouldbeatleast70%accurate,withimbalancechargesassessedtowindgeneratorsfordeviationsupto30%oftheirforecastedday-aheadschedule.Forsolar101Ibid.102CERC(2010a).103Windgenerationcouldbeforecastedonanindividualdeveloperbasisoronanaggregatedbasis(ifabove10MWandconnectedat33kVandabove).Ifresourcesarenotconnectedthroughasinglesubstationatthe33kVlevel,butratherthroughacommonfeeder,theycanbeaggregatedatthesubstationatwhichthefeederterminatesonthedistributionsystemortransmissionsystemlevel.

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andwindforecasterrorslessthan30%,statespurchasingtherenewableenergywouldbeartheimbalancecharge,withcostslatersocializedacrossallstates.104

TheRRFsimbalanceschargeswerebasedontheunscheduledinterchange(UI)mechanism,whichhadbeeninplaceforthermalgeneratorssincetheearly2000s.Asdescribedingreaterdetailinthenextsection,theUImechanismisasystemofimbalancepaymentsandfeesbasedonacombinationofsystemfrequencyandanindividualgenerator’sdeviationfromschedule.GeneratorsthatwerechargedundertheUIpaidfeesintoafund,operatedbytheRLDCs,andtheRLDCpaidgeneratorseligibleforpaymentsundertheUIfromthefund.

ImplementationoftheRRFmechanismwaspostponedthreetimesbeforeitwasimplementedinJuly2013.TheRRFmetwithsignificantresistancefromstakeholders.AsignificantamountofrenewablegenerationcapacityhadalreadybeenbuiltbyMay2010,andthesegeneratorswereexemptedfromforecastingrequirementsandUIcharges.Statesprotestedthattheycouldnotmakeeffectiveuseofpartialsolarandwindforecasts.StatesandgeneratorsalsosuggestedthattheRFFimbalancechargesplacedtoomuchfinancialriskonstatesandgenerators.OtherstakeholdersprotestedagainstalackofclarityinthescopeofwhichgeneratorsshouldbeincludedundertheRRF.InFebruary2014,CERCsuspendedtheRRF,pendinganoverallreview.105

Toaddressstakeholderconcerns,inMarch2015CERCreleasedandinvitedcommentsonproposedrevisionstotheRRF,106whichwerefinalizedintheAugust2015FrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources(“Framework”).107TheFrameworkrevisedtheforecastingproceduresforinterstatewindandsolargeneratorsandtheapproachtocalculatingandsettlingimbalancecharges.

TheFrameworkdelineatestwokindsofforecasts:1)forecastsbyRLDCstoensureefficientandsecuredispatchacrosstheregion;and2)forecastsbygeneratorsatthewindorsolarplantleveltoinformplantschedules.TheformerforecastsaretobesupportedbyRenewableEnergyManagementCenters(REMCs),whichwereestablishedtoprovideadvancedforecastingcapabilitiestotheRLDCs.108WindandsolargeneratorswillhavetheoptionofusingtheforecastsprovidedbytheRLDCs/REMCs,butwillberesponsibleforthecommercialimpactsofwhicheverforecasttheychoosetouse.Toenablehigherforecastaccuracy,theFrameworkexpandedthenumberofallowedschedulerevisionsto16(from8)andreducedthesizeoftheschedulingwindowtoone-and-a-half-hourtimeblocks(fromthree-hourtimeblocks).

104Costallocationacrossstateswastobebasedonaloadratiosharebasis,basedonmonthlypeakdemands.Forsolarforecasterrorsgreaterthan30%imbalancechargeswouldbebornebyallstatesbasedonapresetformula.105Foranoverviewofstakeholderconcerns,seeREConnect,“Wind&SolarForecasting&SchedulingRegulations2015,”http://reconnectenergy.com/blog/2015/08/wind-solar-forecasting-scheduling-regulations-2015/.106CERC(2015a).107CERC(2015a).108REMCswereinitiallyproposedinCEA(2013).

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CERCalsorevisedtheRRFmechanism’sapproachtoimbalancecharges.Ratherthantyingimbalancechargestosystemfrequency,theFrameworkestablishedaseparatetieredsystemofimbalancepaymentsandpenaltiestiedtorenewablegenerators’powerpurchaseagreements(PPAs)(Figure23).Thesechargesareassessedonthebasisofaverageforecasterrorineach15-minuteinterval,normalizedbyavailablecapacity,109andarepayabletoandfromacentralizedfund(“pool”)maintainedbyRLDCs.UndertheFramework,solarandwindgeneratorsarepaidonthebasisofscheduled,ratherthanactualgeneration,whicheffectivelymeansthatonnettheyarepaidtheirPPApriceforactualgenerationwithin15%oftheirforecastedschedule.

Figure23.TieredImbalanceCharges(PaymentsandPenalties)forWindandSolarGeneratorsundertheFrameworkonForecasting,SchedulingandImbalanceHandlingforVariableRenewableEnergySources

Asanexample,considera50MWwindgeneratorwitha4.0Rs/kWhPPA.Insomehypotheticalhour(four15-minuteblocks),supposethatthisgeneratorhasa40MWforecast(hourlyaverage)andactuallydeliversanaverageof35MW.Itthushasanaverageforecasterrorof5MW(=40MW–35MW),anaveragenormalizedforecasterrorof10%(=[40–35]/50),andiswithinthe15%deviationband.Thegeneratorwillbepaid160,000Rsinthathour(=40MW×4.0Rs/kWh)asperschedule,andwillpayatotalof20,000Rstothepool(=4.0Rs/kWh×[5.0MW×100%])inimbalancecharges.Thisleadstoanetof140,000Rsfor35MWgeneratedinthathour,whichisequivalenttothePPApriceof4.0Rs/kWh(=140,000Rs/35MW).

109Thatis,forecasterror(ε)isdefinedas𝜀 = !!!

!"#,whereFistheforecastedvalue,Aistheactualvalue,andAvCis

theavailablecapacityoftheindividualoraggregatedplantunit.Availablecapacityisinstalledcapacityadjustedforunforcedoutages.

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Nowsupposethatthisgeneratorhasa40MWforecastandonlydeliversanaverageof30MW.Itthushasanaverageforecasterrorof10MW(=40MW–30MW)andanaveragenormalizedforecasterrorof20%(=[40–30]/50).Thegeneratorwillstillbepaid160,000Rs,butwillpayatotalof41,000Rsinimbalancecharges(=4.0Rs/kWh×[7.5MW×100%+2.5MW×110%])tothepool.Inthiscase,thegeneratorwillnet119,000Rsfor30MWgenerated,oranaveragepriceof3.97Rs/kWhandanetdeviationchargeof0.03Rs/kWh.

UndertheFramework,RECsareallocatedtogeneratorsbasedonscheduledratherthanactualgeneration.CERChadoriginallyproposedthatindividualsolarandwindgeneratorswouldberequiredtoprocureRECstomakeupanyshortfallsbetweenscheduledandforecastedgeneration.However,theFrameworkultimatelycentralizedresponsibilityformanagingtheRECimplicationsofdifferencesbetweenscheduledandactualgenerationthroughtheNLDC.Ifthereislessrenewablegenerationthanscheduledinamonth,theNLDCwillpurchaseRECsfromthemarkettomakeupforthedifferenceusingfundsfromthepoolofimbalancecharges.Ifthereismorerenewablegenerationthanscheduledinamonth,RECswillbecreditedtotheimbalancepoolandcarriedforwardtothenextmonth.

6.3.2 FrameworkforNon-RenewableResourcesInterstatenon-renewablegenerationconsistsofthreemainforms:(1)centralgovernment-ownedgeneratorsthathavetheircapacityallocatedtomultiplestates,(2)shorter-termbilateralcontractsbetweenstatediscoms,and(3)powertransactionsthroughthepowerexchanges.

Sincetheearly2000s,centralgovernment-ownedgenerationhasbeensubjecttoatwo-parttariff—anavailability-basedtariff(ABT)—thatcompensatesgeneratorsseparatelyforcapacityandenergy.Capacitypaymentsaremadeonthebasisoftheavailablecapacitydeclaredbytheplantonaday-aheadbasis.Energypaymentsarebasedonscheduledgeneration.Statesownsharesofcapacity,andhaverightstoschedulegenerationuptotheirallocatedcapacity.Inprinciple,theABTenablesmoreefficientuseofinterstategeneratorsbyoff-takerstates,byenablingSLDCstoschedulethesegeneratorsinmeritorder.

TheABTalsoincludedanunscheduledinterchange(UI)mechanism,asashort-termbalancingmechanism.110TheUImechanismsoughttoaddressfrequency“excursions”intheregionalgrids.Tomaintainagivensystemfrequency—inIndia50Hertz(Hz)—systemoperatorsmustkeeploadsandgenerationinconstantbalance.Ifloadexceedsgeneration,systemfrequencywillfallbelow50Hz;ifgenerationexceedsload,itwillriseabove50Hz.Inon-peak(highload)periods,systemfrequencywasoftenbelow50Hz,whereasinoff-peak(lowload)periods,itwasoftenbelow50Hz.

TheUImechanismprovideddecentralizedincentivesforloadservingentitiesandgeneratorstocorrectfrequencyexcursions,bycreatingasystemofimbalancecharges(paymentsandpenalties)tiedtosystemfrequencyandscheduledeviations:

110SeeCERC(2010b).

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• Low system frequency (load > generation) — load serving entities were penalized forconsumingmorethantheirscheduledamountofinterstategeneration(“over-withdrawal”)andpaidforconsuminglessthanthisamount(“under-withdrawal”);generatorswerepenalizedforgeneratingmorelessthantheirschedule(“under-injection”)andpaidforgeneratingmorethantheirschedule(“over-injection”)(Table9).

• Highsystemfrequency(generation>load)—loadservingentitiesandgenerationweregivenasmalltozeropenaltyforunder-withdrawalandover-injection,respectively,andasmalltozeropaymentforover-withdrawalandunder-injection.

Table9.UIChargesonLoadsandGenerators

SystemFrequency

Loads Generation UICharge

Low Over-withdrawal Under-injection PenaltyUnder-withdrawal Over-injection Payment

High Over-withdrawal Under-injection ZerotosmallpaymentUnder-withdrawal Over-injection Zerotosmallpenalty

TheUIchargedwascomposedoftwoparts:(1)anupwardslopedchargetiedtosystemfrequency,and(2)atieredchargelinkedtoanindividualloadservingentity’sorgenerator’sdeviationfromschedule.Theformerprovidedmarginalincentivesforthesystem,whilethelattereffectivelyactedasanimbalancechargeoninterstateinterchangeschedules.

TheRLDCsandRPCsmanagedtheschedulingandbalancingprocessassociatedwiththeUIinfivesteps:

1) Interstategeneratorsdeclaredtheiravailabilityforeach15-minutetimeblockthefollowingday.2) Based on available capacity and contracts, RLDCs communicated to each state how much

interstategenerationcapacitytheyhad.3) SLDCssubmittedtheirpowerdemandsforthesegeneratorsforthenextdaytotheRLDCs.4) TheRLDCspreparedinterstategenerationschedules,accountingforgeneratorandtransmission

constraints.5) TheRPCssettleaccountsforloadservingentitiesandgeneratorsonaperiodicbasis;imbalance

chargesarepaidtoandfromapool.

In2014,respondingtolarge-scalepoweroutagesin2012,CERCreplacedtheUImechanismwithadeviationsettlementmechanism(DSM).111TheDSMchangedmethodologicaldetailsassociatedwiththeUI,butleftitsarchitecturelargelyintact.

WiththeDSM,loadservingentitiesandgeneratorspayatwo-partimbalancecharge,asundertheUI.Thepricescheduleforthefrequency-basedimbalancecharge,showninFigure24,isbasedonthreepricepoints.Thefirstpoint,at50.05Hz,iszero,meaningthatabove50.05Hztherearenoimbalance

111CERC(2014).

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paymentsorpenalties.Thesecondpoint,at50.01Hz(178paise/kWhinFigure24),isbasedonthemedianvalueofaverageenergycostsforcoal-firedgeneratorsregulatedbyCERCoverasix-monthperiod.Thethirdpoint,at49.70Hz(824.04paise/kWhinFigure24),isbasedonthehighestvalueofaverageenergycostsforcoal-firedgeneratorsregulatedbyCERCoverasix-monthperiod.Forinterstategeneratorspurchasingfuelundertheadministeredpricemechanism(APM),imbalancechargesarecappedattheenergycostofimportedcoal(303.04paise/kWhinFigure24).

Figure24.Frequency-BasedImbalanceChargeScheduleundertheDSM

ThesecondpartoftheDSMimbalancecharge—referredtoastheadditionaldeviationcharge—isbasedonover-withdrawals(loads)orunder-injections(generators)thatexceed150MWor12%ofschedule,whicheverislower.Fordeviationsbetween150MWandupto200MWor12%andupto15%ofschedule,loadsandgeneratorspay20%ofthefrequency-basedimbalancecharge.Fordeviationsbetween200andupto250MWor15%toupto20%ofschedule,loadsandgeneratorspay40%ofthecharge.Fordeviationsinexcessofthese,penaltiesareassessedat100%ofthedeviationcharge.

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Figure25.AdditionalDeviationChargeforOver-Withdrawal(Loads)andUnder-Injection(Generators),WhenDeviationsExceed150MW

Consider,forinstance,a300MWinterstategeneratorpayingthatpaysAPMfuelprices.Inagivenhour,thisgeneratorisscheduledforanaverageof300MWbutactuallygenerates275MWwhenaveragesystemfrequencyis49.80Hz.Inthiscase,thefrequency-basedDSMchargeis75,760Rs(=303.04paise/kWh×25MW)andthereisnoadditionaldeviationchargebecausethedeviation(25MW,8%)islessthan150MWor12%.Ifactualgenerationwas250MW,thegeneratorwouldhavepaidafrequency-basedpenaltyof151,520Rs(=303.04paise/kWh×25MW)andanadditionaldeviationchargeof3,030Rs(=5MW×20%×303.04paise/kWh),oratotalchargeof154,550Rs.

AlthoughinterstaterenewablegenerationistreatedseparatelyundertheDSM,intrastaterenewablegenerationmayhaveimplicationsforDSMchargesonstatediscoms.Stateswithsignificantintrastatewindandsolargenerationadjusttheirdemandsforinterstategenerationonthebasisofreal-timechangesindemandandwindandsolaroutput,whichcanleadtolargedeviationsfromday-aheadschedules.Forinstance,consideradiscomwith500MWofday-aheadscheduledinterstategeneration.Ifintrastatewindgenerationis200MWlowerthananticipatedanddemandis50MWhigherthanexpected,thestate’sDSMdeviationfromday-aheadschedulewouldbe250MW(25%).Before2015,thestatewouldhavebeensubjectedtobothfrequency-basedchargesandadditionaldeviationchargesundertheDSM.

Additionaldeviationchargethresholds(“DSMlimits”)—themaximumover-withdrawalbeforepenaltiesareimposed—actasaneffectiveintradayimportconstraintonstates.In2015,CERCproposedsettingDSMlimitsforstates(loads)basedonapercentageofpeakdemandintheprevious

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year.112CERCultimatelyrejectedthisapproach,butloosenedDSMlimitsonrenewablerichstates.113Stateswith1,000MWto3,000MWofsolarandwindcapacityarenowallowed200MWdeviationlimits;stateswithgreaterthan3,000MWofsolarandwindcapacityarenowallowed250MWdeviationlimits.

Before2016,theDSMfunctionedasadecentralizedimbalancemechanismonalltimescales.In2015,CERCpassedanAncillaryServicesOperationsRegulation,whichprovidedaframeworkforallowingtheRLDCstocentrallydispatchinterstategeneratingunitstomaintaingridfrequency,andtocompensategeneratorsprovidingthisservice.114Todeterminewhichgeneratorsshouldprovideancillaryservices,RLDCscreatearegionalmeritorderstackofunscheduledinterstategenerationcapacity,basedonreportedvariablecostsandaccountingfortransmissionconstraints.RLDCscanthendispatchthiscapacityinresponsetosevenevents:

• “Extremeweatherforecastsand/orspecialday;• Multiplegeneratingunitortransmissionlineoutages;• Trendofloadmet;• Trendsoffrequency;• Intimationofanyabnormaleventsuchasoutageofhydrogenerating;• Unitsduetosilt,coalsupplyblockadeetc.;• Excessiveloopflowsleadingtocongestion;and• Suchotherevents.”115

RPCsarechargedwithsettlingancillaryservicepayments,onthebasisofreportedfixedandvariablecosts.

6.4 StateModelRegulationsTheForumofRegulators(FOR),abodyofregulatorsfromthecentralandstateelectricityregulatorycommissions,convenetoanalyzetariffordersandharmonizeregulationsbetweenthecentralandstatelevels,amongotherresponsibilities,severaltimesayear.Throughtheanalysisandharmonizationprocess,theFORoccasionallyprovidesmodelregulationsthatStateElectricityRegulatoryCommissions(SERCs)canuseasatemplatefromwhichtobaseitsownregulations.Statesarenotrequiredtousethemodelregulationsandcanissueseparateregulationsentirelyiftheychoose.

FollowingonCERC’sFramework,theForumofIndianRegulators(FOR)issuedModelRegulationsonForecasting,SchedulingandDeviationSettlementofWindandSolarGeneratingStationsattheStateLevel(“FORModelRegulations”)in2015.116TheFOR’sModelRegulationscloselymirrorCERC’sFramework,withsomekeydifferences.

112CERC(2015d).113CERC(2016).114CERC(2015c).115CERC(2015c),p.3.116FOR(2015).

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UndertheFOR’sModelRegulations,windandsolargeneratorsarerequiredtoprovidetheirownforecastsorusetheStateLoadDispatchCenter’s(SLDC’s)forecastonaday-aheadbasisin15-minutetimeincrementsandbearthecommercialimpactsofwhicheverforecasttheychoosetouse.Schedulerevisionsareallowedupto16timesaday,consistentwiththeFramework.TheModelRegulationsdifferfromtheFrameworkinfourkeyareas:1)provisionofaweek-aheadforecastinadditiontotheday-aheadforecast;2)paymentsettlementbasedonactualgeneration,ratherthanscheduledgeneration,forintrastatesales;3)theintroductionofqualifiedcoordinatingagencies(QCAs);and4)tighteningofthedeviationbandsfrom15%(intheFramework)to10%fornewgenerators.

AkeydifferencebetweentheModelRegulationsandtheFrameworkistheintroductionoftheQCAconceptanditsrelatedtighteningofthedeviationtolerancebands.TheQCAisdefinedasastateentitythatcanforecastforanaggregatedsetofwindandsolarfacilitiesthataremeasuredatasinglesubstation,andisresponsibleformetering,collectingdata,andcommunicatingwiththedistributioncompanies(discoms),SLDCs,andotherrelevantagencies.QCAscanbeanindividualgeneratorwithintheaggregatepooloranotheragencyentirely.TheQCAisalsoresponsibleforcommercialsettlementsofthestateDSMpoolandallocatespaymentstoindividualgeneratorswithinitsaggregation.Whenchargesaremadeorpaymentsaregiventoaggregatedfacilities,QCAsareresponsibleforallocatingthedeviationchargestotheindividualgeneratorseitheronthebasisoftheactualgenerationshareorshareofavailablecapacity.

Withtheintroductionoftheaggregatorframework,theFORreducedthedeviationtolerancebandfrom15%downto10%fornewprojects.FORfeltthatwithQCAs,accuracywithin10%shouldbeachievablebasedoninternalsimulationresults.Existingprojects,however,fallunderthe15%threshold.