Yesterday’s design basis is no longer valid
The term “Renewable Integration” is shorthand for “the design basis of the grid is changing.” Due to rapidly declining costs and state and federal policies like California’s Renewable Portfolio Standard (RPS) goal, deployment of Variable Energy Resources (VERs) has significantly increased. Managing all this renewable energy presents new challenges because VERs:
are unpredictable when it comes to energy production.
experience significant output fluctuations in real time, particularly for solar PV, leading to a high degree of supply variability and increased susceptibility to frequency excursions.
AS A RESULT
The design basis of the current grid--which historically relied on predictable, slow-moving load and generation--is no longer sufficiently valid. The scheduling of customer demand (load) and energy generation has long been critical to the reliable operation of electric grids. Until wind and solar generation began to increase, Day Ahead scheduling worked well to balance supply and demand. But because of the unpredictable nature of VERs and the need for a grid that operates at much smaller time scales than before, the Day Ahead time frame has become too slow for real-time renewable integration needs.
Today, most VERs are “scheduled” in the real-time market; previously, this market was only intended to balance the small amounts of energy needed to fine tune the system. Though this shields VER owners from some financial risk, the resulting forecast errors create impactful schedule deviations, high balancing costs, and other negative downstream consequences for grid operators like CAISO and all major market players.
Real-time balancing is not a long-term solution
Attempting to balance unpredictable renewable resources in real time is costly and time-intensive for ISOs. If they are unable to meet federal reliability and compliance standards, they face hefty financial penalties, harmful press, and eventual FERC intervention.
Currently VER owners are caught between paying imbalance costs when using the DAM and negative prices in the RTM, and they suffer negative financial outcomes when the grid operator is forced to do a curtailment. Firming energy resource owners like natural gas plants are facing reduced financial viability as the cost of electricity continues to decline. Utilities face blame when consumer rates rise, and Community Choice Aggregators that offer clean energy at a lower cost may lose customers if they cannot deliver on that commitment.
For industry players as well as consumers and businesses, stabilizing electrical supply and demand to ensure the long-term reliability and affordability of the grid amidst ever-increasing levels of renewable generation is critical.
State regulatory and governmental agencies like the California Energy Commission (CEC) must ensure all the renewable energy generated is put to use; but in order to ensure compliance with balancing standards and to avoid costly service interruptions for ratepayers, CAISO may be forced to limit the amount of renewable electricity generated, known as curtailment, in the RTM. If this happens, these states risk not meeting their public policy goals for environmental compliance and facing serious consequences in terms of credibility and reputation.
Day Ahead scheduling is still the most effective way to ensure grid reliability
Current approaches to managing renewable energy--such as improved forecasting; demand response; creating new, regional markets; and centralized Energy Management Systems--focus on more centralized control. While these are constructive efforts that will help contribute to a solution, they will not have a large enough impact alone to transform the grid in the way that’s needed.
It’s now well-understood that new and different solutions--including technology and business arrangements--are needed to manage and bring flexibility to the transformed grid.
UniGen Resources is one such solution that allows VERs to fully utilize the Day Ahead Market. Our distributed technology and novel business arrangements create renewable hybrid power plants out of existing individual generating resources.