Projected US renewables could accelerate power price volatility — what can grid operators do?
New forecasts say the high penetrations of renewables coming onto the U.S. power system by 2030 could accelerate recent isolated instances of negative and spiking prices in wholesale markets.
Research from Lawrence Berkeley National Laboratory (LBNL) shows higher renewables penetrations could cause these supply-demand imbalances more frequently, imposing instability in power markets.
If this growth pattern continues, as many expect it will, grid operators and renewables developers will need to act to neutralize price volatility by making the electric power system more flexible, the LBNL researchers reported.
As more solar and wind power comes online, renewables penetrations are reaching unprecedented levels in some places. On March 31, wind momentarily reached a North American record of over 62% of Southwest Power Pool (SPP) generation. On April 28, renewables met 72.7% of demand for the California Independent System Operator (CAISO).
While the numbers are much smaller nationally, broader indications show unremitting growth of variable renewable energy (VRE). Grid operators are implementing a variety of steps to integrate that new capacity while minimizing adverse impacts on the system.
The threat of growth
Many long-lasting decisions about the power system “assume a business-as-usual future with low shares of VRE.” But a “high VRE future” can lead to “profound changes in wholesale electricity price patterns,” such as extreme price drops and spikes, according to LBNL’s report.
When generation oversupply forces project owners to bid into markets at their own cost, just to keep generating, it can cause power prices to plunge below $0/MWh. Additionally, power prices spike to untenable highs when demand peaks in supply-constrained localized areas.
In May, renewables served an average of almost 36.1% of the CAISO load, up from 2016’s 21%, with solar providing about 52% of the renewable generation and wind about 29%. Wind was 20.2% of total SPP system capacity at the end of 2017, up from 2016’s 19%. The 2017 wind generation capacity on the Electric Reliability Council of Texas system was 19.6%, up from 2016’s 13%. Even New York’s tiny 4% was a 25% increase on 2016’s 3%.
Of the total 24,614 MW of new U.S, generating capacity in 2017, wind’s 6,881 MW accounted for 27.9%, and solar’s 4,853 MW added another 19.7%, according to Federal Energy Regulatory Commission data. That made VRE the single biggest source of new U.S. generation capacity in 2017.
Threat or opportunity?
The LBNL researchers modeled four 2030 VRE scenarios. One was a business-as-usual scenario with today’s VRE penetrations, and one was a “balanced” 20% wind-20% solar scenario. The other two scenarios had either 30% solar and 10% wind or 30% wind and 10% solar.
VRE penetrations of 40% or more would drive down average annual hourly wholesale energy prices “by $5/MWh to $16/MWh depending on the region and mix of wind and solar,” LBNL reported. The price impact is much greater at times of wind or solar overgeneration, the modeling found.
Ten years ago, U.S. National Renewable Energy Laboratory (NREL) researchers first saw rising renewables penetrations. Like today’s researchers, they were concerned. That concern led them to discover new system operations that have kept then-predicted price volatility in check and transformed the threat into today’s renewables boom. It can happen again, LBNL Research Scientist Ryan Wiser told Utility Dive.
The LBNL findings
The research shows high VRE penetrations can make future price patterns “meaningfully different,” said LBNL’s Wiser, lead author of the new report.
There could be “a general decrease in average annual hourly wholesale energy prices” and “increased price volatility and frequency of very low-priced hours.”
Current penetrations of VRE have led to very little of the recent price volatility, Wiser told Utility Dive.
Previous LBNL work showed “about 90% to 95% of the explanatory factors for the average annual wholesale price decline of about $0.04/kWh between 2008 and 2016 was driven by the decline in natural gas prices,” he said.
There was also “no observable widespread impact of VRE on thermal plant retirements,” he added. Instead, “plant characteristics” forced the closures seen over the last decade.
There was, however, a “significant increase” in negative wholesale pricing and curtailments between 2015 and 2017, Wiser said. “This is quite clearly correlated with both the growth of wind and solar, and the location of that growth.”
Curtailment occurs when grid operators shut down renewables generation in response to negative prices and oversupply on their systems.