Renewable integration and direction of the US electricity markets
The United States Environmental Protection Agency (EPA) released the Clean Power Plan Rule (CPPR) to cut carbon pollution from existing power plants on August 3, 2015. The CPPR requires the current power fleet to cut CO2 emissions 32 percent below 2005 levels by 2030. The final ruling expects power generation from renewable resources to account for 28 percent of power generation by 2030. According to the U.S. Energy Information Administration (EIA), renewable sources of energy accounted for about 13% of electricity generation in the U.S. in 2014. Consequently the share of electricity generation from the renewable resources is expected to double in the next fifteen years.
Rapid penetration of renewables into the power system will likely change the way Independent System Operators (ISOs) currently operate. The future presence of such a high share of renewables on the grid raises some real-time reliability and operational concerns for the ISOs. For example, as it was famously depicted by the California Independent System Operator’s (CAISO) so called Duck Chart, rapid changes in renewable generation, such as solar generation, during the mid-day hours is likely to cause overgeneration and sharp changes in the real-time ramping needs. This is especially evident during the shoulder months, April and November, when loads are relatively low and renewable generation is high, including hydro. The ISOs are continually adjusting their operational procedures and market mechanisms to deal with rapid penetration of renewables within their footprint. This new paradigm leads to growing needs by the CAISO and other ISOs for:
° better coordination between day-ahead market and 15-minute real-time market,
° flexible\fast ramping capacity,
° ancillary services and large and flexible energy storage capacity, and
° integration of the distributed energy resources into the system.
A 15-minute Day-ahead Market
All of the ISOs in North America currently use hourly market optimization to schedule energy in the day-ahead markets. Given the developments in the software algorithms and improved data processing and storage technologies, day-ahead markets can incorporate more granular optimization models to schedule energy and ancillary services. That is, 15-minute scheduling by the day-ahead markets may be a viable option for the ISOs in the coming years. Some of today’s real-time ramping issues result from the scheduling differences between hourly day-ahead schedules and 15-minute schedules. These real-time ramping issues are more often observed at the beginning or end of a trading hour. The development of 15-minute scheduling in the day-ahead will likely help eliminate these real-time ramping issues.
Mechanisms for Reliable and Flexible Ramping Capacity
Rapid renewable penetration has caused the ISOs to develop and/or improve their capacity incentive mechanisms where there are financial incentives for the generators with fast ramping capabilities. The CAISO plans to launch a flexible ramping product that can be bid into both the day-ahead market and 5-minute real-time markets in 2016. Although its main scope is different from CAISO, the Pennsylvania-New Jersey-Maryland Interconnection (PJM) capacity performance product also provides incentives for more reliable capacity as well as flexible ramping capacity. The Midcontinent Independent System Operator (MISO) is working on integration of ramp capability products into the day-ahead and real-time markets. Similarly, Electric Reliability Council of Texas (ERCOT), New York Independent System Operator (NYISO), and Independent System Operator of New England (ISONE) are constantly working to improve their existing capacity incentive mechanisms to incentivize reliable and flexible ramping capacity.