Leveraging Wholesale Markets to Create the Affordable Microgrid
icrogrids are not just for reliability. They also are used to manage energy pricing through leveraging wholesale markets. We explain how in part five of this six-part Microgrid Knowledge Special Report Series on reliability-as-a-service and the affordable microgrid.
Gas-fired microgrids offer operational flexibility that is crucial to today’s electric grid and complex power markets. Growing levels of renewable energy penetration are changing the nature of power markets, particularly in competitive wholesale markets.
That is especially true in Texas, where 90 percent of the electricity consumed in the state flows through the Electric Reliability Council of Texas (ERCOT).
ERCOT is an independent system operator (ISO) which, like a regional transmission organization (RTO), acts as a clearinghouse between electricity supply (generation) and demand (load). ISOs and RTOs are not-for-profit organizations that manage and operate wholesale power markets but do not themselves own any generation or transmission assets.
ISO participants typically include a wide variety of power producers, from operators of coal-fired and gas-fired plants to wind farms and nuclear power plants. They also include load serving entities, such as regulated distribution utilities.
Seven ISO/RTOs in the United States and three in Canada serve about 60 percent of North America’s electric load. Some serve a single state such as California or New York. Most are regional, such as PJM Interconnection, the largest among them, which serves 13 states and the District of Columbia.
Wholesale power markets and microgrids
The basic mechanism of an ISO/RTO is the day-ahead market. Rules vary by region, but generators typically bid into the day-ahead market. The grid operator then ranks the bids and dispatches the generators from the lowest to the highest priced until all forecast load is filled.
In addition to a day-ahead market, ISO/RTOs can oversee markets for a variety of other functions that are needed to continuously balance supply and demand of electricity. These ancillary services include services referred to as frequency regulation, spinning reserves and operating reserves.
When large amounts of surplus wind energy enter the grid, prices can go negative due to excess power availability. When the wind suddenly dies, the grid may run short on power. Traditional fossil fuel generators cannot ramp up quickly enough to meet the near-instant demand for power.
Wholesale markets across the country have seen growing levels of renewable energy penetration—particularly Texas. Last spring, ERCOT hit a record with wind power supplying just over 48 percent of load. The Southwest Power Pool also set a record with wind power supplying nearly 44 percent of load.
While high levels of wind power may be good for the environment, their unpredictable nature can create challenges on the smooth operation of the grid. When large amounts of surplus wind energy enter the grid, prices can go negative due to excess power availability. When the wind suddenly dies, the grid may run short on power and traditional fossil fuel generators cannot ramp up quickly enough to meet the near-instant demand for power.
In ERCOT, the growing presence of wind power combined with price volatility has made it tough for many traditional power plants to operate profitably. A total of about 5,625 MW of fossil fuel capacity in ERCOT (enough to supply the Austin and San Antonio, Texas metropolitan areas combined) is scheduled to be retired or mothballed in 2018. Even new, modern gas-fired combined-cycle plants, such as Panda Energy’s Temple plant, have had difficulty operating in this challenging market. In April 2017, Panda filed for bankruptcy court protection for the plant.
“When we sell to the grid, we respond very quickly to help buffer the intermittent nature of wind and solar, thus enabling continued growth of these renewables and decarbonization of electricity.” – Thomas McAndrew, ERock
With the closing of these power plants, the Department of Energy (DOE) introduced a Notice of Proposed Rulemaking (NOPR) that would provide cost recovery for coal and nuclear plants that keep fuel on site. The NOPR was rejected by the Federal Energy Regulatory Commission (FERC), as there was no evidence to support the claim that these traditional power plants aid in grid resiliency. FERC Commissioner Richard Glick, however, acknowledged microgrids as a technology that does.
Resiliency is a defining feature of microgrids and industry leaders are actively discussing the benefits they can provide for the nation’s energy markets.
“ERock builds and operates ultra-clean and quiet resiliency microgrids specifically to provide electricity for critical services when the transmission and distribution cannot deliver,” Thomas McAndrew, president and CEO of Enchanted Rock, said…..