Technology, markets and contracts — oh my! The keys to profiting from California’s duck curve
California’s grid operator and other energy sector stakeholders want to use the wholesale power market to transform the state’s renewables over-generation from a problem to a solution by aligning technology, markets and contracts and through better long-term planning.
Recent average wholesale electricity market price fluctuations reveal a growing burden for the California Independent System Operator (CAISO). In 2016, the price during midday hours was about $18/MWh and spiked to $35/MWh during peak demand, according to Energy Department January to June data. This year, the midday price fell below $15/MWh and spiked to nearly $60/MWh at the peak.
The price differentiation follows CAISO’s load through the fluctuations of the now well-known duck curve. Prices are lowest when midday demand falls off but rise sharply as demand spikes later in the day. California’s 6,000 MW of rooftop solar exacerbate the load and price drop-offs that lead to the real concern — the need to meet the long, high ramp-up to peak demand.
California policymakers and others during an Oct. 18 session, Unlocking California’s renewables “dividend,” at CAISO’s 2017 Stakeholder Symposium, argued smart investments in supply and demand can turn these dynamics from costs to dividends. CAISO can develop resources to use the midday over-generation, flatten the ramp and lower the peak. Doing so, they said, can bring California lower electricity prices, a stronger economy, healthier air and reduced greenhouse gas emissions.
The key, said moderator John Danner, senior fellow at the University of California, Berkeley-Haas School of Business, is a strategy that is not “more or less business as usual.”
What are the dividends?
CAISO VP Mark Rothleder told the symposium the grid operator foresees a system transformation that will produce both supply and demand dividends.
California’s grid now oscillates between abundance at midday and scarcity during the ramp. But its several hours of up to 2,000 MW of over-generation can be marketed instead of curtailed, he told Utility Dive in an email.
Emerging demand-side resources already deliver downward flexibility during the ramp to the peak. “Sophisticated inverter based controls” can replace the conventional resources that now provide grid reliability, frequency response, voltage control and local responsiveness to contingencies, Rothleder wrote.
The CAISO market can send price signals to reshape demand and it can leverage regional collaboration through its energy imbalance market (EIM), to supplement supply, he added. “If we can make the most use of the new resources by maximizing both the energy and grid services they can provide, ratepayers who have invested in these resources will benefit.”
Carl Zichella, director of Western transmission for the Natural Resources Defense Council (NRDC), told Utility Dive in an email that dividends for the state from such steps have been estimated at $1.5 billion or more. They include energy and transmission cost savings from greater use of renewables and energy efficiency monetized through CAISO markets.
“Dirtier resources like coal, with high fuel costs, fare poorly in these markets,” he said. As cleaner resources serve more demand, lower power costs will allow consumers to channel savings into other sectors of the economy, which in turn will create additional economic benefits. “All California residents will benefit in one way or another.”
Cleaner resources will be used to both meet demand and provide grid services, Zichella added. Renewables will become more available as more of the West’s load serving entities (LSEs) join CAISO’s EIM or other organized markets and transmission system operators (TSOs) expand interconnections. That will shutter “dirtier” and “costlier” traditional generators, accelerating returns, he said.