E2SHI•
The Future Ain't What It Used to Be: What Variable Renewables Mean for
Conventional Generation
NY Association for Energy EconomicsAugust 23, 2012
Benjamin F. HobbsSchad Professor of Environmental Management, Whiting School of Engineering
Director, Environment, Energy, Sustainability & Health Institute (E2SHI)The Johns Hopkins University
Chair, Market Surveillance CommitteeCalifornia Independent System Operator
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Outline
I. Our goals: economy, environmentII. The challenge of variable output & pricesIII. Investment impactsIV. Why won’t the market provide needed
capacity? And how can it be fixed?
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A Lesson about Electricity
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1. Min cost / max net economic benefits
2. Min emissions & other environmental impacts
I. Fundamental Goals of Market Design
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K1. ?
• “a2. S
Source: Kay, 2011
Proxy Goals
• Maximizing proxies not same as maximizing fundamental efficiency & environmental objectives
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Renewable Portfolio Standard Policies, June 2012
29 states,+ Washington DC and 2 territories,have
Renewable Portfolio Standards
(8 states and 2 territories have
renewable portfolio goals).
Source; DSIRE, NCSU, www.dsireusa.org/summarymaps
E2SHI•
Outline
I. Our goals: economy, environmentII. The challenge of variable output & pricesIII. Investment impactsIV. Why won’t the market provide needed
capacity? And how can it be fixed?
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II. The Challenge of Variability:Dispatch Conventional Gen to Net Load
M. Rothleder, CAISO, Operational Flexibility Study Update, 6/22/2012 Market Surv. Comm. Mtg.
8
Load
& N
et L
oad
(MW
)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
36,000
38,000
40,000
42,000
44,000
46,000
0:00 1:30 3:00 4:30 6:00 7:30 9:00 10:30 12:00 13:30 15:00 16:30 18:00 19:30 21:00 22:30 0:00
Load Net Load Wind Solar
Load, Wind & Solar Profiles – High Load Case, Jan. 2020
Win
d &
Sol
ar (M
W)
8,000 MW in 2 hours
6,300 MW in 2 hours
13,500 MW in 2 hours
E2SHI•
Can increase both costs and emissions• KU-Leuven stochastic unit commitment (De Jonghe, Hobbs, Belmans 2011):
■ Minimizing wind spill increases fuel costs & CO2 (relative to dispatch under 0 €/MWh wind bid)
• 17% reduction in spill possible• Per MWh of spill reduction:
0.71 t CO2 increase (+1.5% total CO2) 49 € cost increase (+1.3% total cost)
Example of Fundamental vs. Proxy Goals: Absolute Priority for Wind in Dispatch Makes
No Economic or Environmental Sense
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What’s Happened To Prices? Texas
David J. Maggio, ERCOT, Presentation IEEE PES, 7/2012
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What’s Happened to Prices? South Australia: 17% Wind
Cutler, Boerema, MacGill & Outhred, Energy Policy, 2011; I. MacGill, IEEE PES Mtg, 7/2012
• Revenue by gen type 47 $AU for wind 90 $AU for other
Load (MW) Duration Price ($/MW) Duration
Wind MW
Wind MW
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What Might Happen to Prices? CaliforniaCAISO 20% Penetration Study (2010)
Gas weekly MW generation
2012 Base Casevs.
20% Wind Case
Spring Energy Price Distribution
20% RPS 2.5% Lower Prices
Steam Gas CC Gas CT Gas0
10
20
30
40
% Revenue Loss under 20% RPS
Hour
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What Might Happen to Prices? NYISO2010 NYISO “Growing Wind” integration study
Price Duration Curve for 1275 and 8000 MW Wind Capacity(Superzones A-E)
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Why Revenues Diverge Among Gen Types
2000Net Load, MW
1000
timeFast 0 0 400 0 MWSlow 1000 1000 1600 2000 MWWind 600 500 200 100 MW LMP: 30 -10 70 30 $/MWh
• E.g., a system with two types of thermal generation: – 1000 MW of quick start peakers @ $70/MWh– 2100 MW of slow thermal @ $30/MWh; Max ramping = 600 MW/hr
• Morning ramp up and resulting generation:
W W
W W
Avg. Price Received$70$34.3$18.6
Spot prices reward flexibility!
E2SHI•
Outline
I. Our goals: economy, environmentII. The challenge of variable output & pricesIII. Investment impactsIV. Why won’t the market provide needed
capacity? And how can it be fixed?
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III. What do those Prices Imply for Long Run Generation Mix? The WECC Case
J. Bushnell, “Building Blocks: Investment in Renewable & Nonrenewable Technologies,” Iowa State U, 2010
Baseload CC Peakers
MW MW
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What do those Prices Imply for Long Run Generation Mix? The UK Case (15% Wind)R. Green & N. Vasilakos, Imperial College, The Long-Term Impact of Wind
Power on Electricity Prices and Generating Capacity
Wind
Peakers
CombinedCycle
Baseload
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CAISO: 33% Wind in 2020 Potentially 4,600MW of Upward Flexible Resources Needed (Hi-Load Scenario)
M. Rothleder, CAISO, Operational Flexibility Study Update, 6/22/2012 Market Surveillance Comm. Mtg.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Trajectory, Environmental, Cost, Time Constraint Cases
(1-in-2 year load, 5,688 MW of incremental DR, 5,145 MW of
Energy Efficiency)
2020 LTPP Operational Case (10% (5,500 MW) Higher Load)
2020 LTPP Operational Case(3,173 MW Local Capacity
Resources)
2018 Sensitivity Risk of Retirement Case
Capa
city
(MW
)
Generic Upward Capacity Needs to Meet Observed A/S Load Following Shortages
Local Capacity Needs (Based on LCR Studies of OTC Retirement) System Neeeds
18
E2SHI•
Outline
I. Our goals: economy, environmentII. The challenge of variable output & pricesIII. Investment impactsIV. Why won’t the market provide needed
capacity? And how can it be fixed?
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IV. CAISO Needs It, But Are They Getting It?
www.calpine.com/power/plant.asp?plant=28
- Announced intent to retire new (2001) CC Plant (Sutter)
- Losing 11 GW of Once-Through Cooled Capacity?
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Why Doesn’t the CAISO Get Its Needed Capacity?
Spot Market Failures: Markets suppress price variability
Flexibility not rewarded- 5-15-60 minute averaging times- Risk disregarded in scheduling- Public/operator distaste for price spikes
Bid & price caps
“Missing Money”
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Fixes?I. Operational market fixes
- Shorter intervals- Ramp constraints/products in spot markets
- MISO- CAISO: Twice as costly as spin in Q2 2012
- Stochastic unit commitment/dispatch?
II. Capacity market fixes- Different flavors of capacity- Longer horizon & liquid capacity market
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New York: Monthly Capacity Market
S. Harvey, S. Pope, W. Hogan, Preliminary Evaluation of the New York ISO Capacity Market, New York ISO ICAP Working Group, 7/31/2012
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More thanenough capacity …..
PJM Capacity Market (RPM): Eliciting Capacity Investment from Surprising Sources
Brattle, Second Performance Assessment of PJM’s Reliability Pricing Model Market Results 2007/08 through 2014/15, Aug.2011
…At prices lower than “CONE”
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PJM RPM: Surprising Capacity SourcesBrattle, Second Performance Assessment of PJM’s Reliability Pricing Model Market Results 2007/08 through 2014/15, Aug.2011
GainsLosses
Target
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Conclusions
Variable net loads and prices • Lower margins from spot energy for
thermal generation
To get an economic & clean gen mix, more revenues needed from:
• Ancillary services E.g., CAISO flexiramp
• Capacity markets E.g., PJM RPM
