HOLIDAY READING: HOW UTILITIES AND POLICYMAKERS CAN MAINTAIN AND BOOST RENEWABLE ENERGY'S VALUE

How utilities and policymakers can maintain and boost renewable energy's value; Cheaper storage, widespread resources, real time prices, let us count the ways

Herman K. Trabish, May 7, 2015 (Utility Dive)

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Grid operators have overcome the technical barriers to integrating 30% solar PV or 40% wind on their systems. Now only the economics stand in the way, as the value of renewables to utilities can change, and often declines, as their penetrations increase.

But, new research shows that barrier could be ready to crumble as well.

Advanced power electronics incorporated into utility-scale solar and wind projects, sub-hourly electricity marketplaces, and highly accurate forecasting are allowing systems across the U.S. and around the world to reachunprecedented levels of renewables penetration.

Innovations in battery storage, more strategically positioned generation sites, and electricity markets with built-in price incentives are among the most important strategies that will prevent renewables from losing value as more are added to the grid. That's the central message of a new report from the Lawrence Berkeley National Labs (LBNL) focusing on how to preserve and boost the value of renewables at high penetrations.

The report, "Strategies to mitigate declines in the economic value of wind and solar at high penetration in California" is in the June issue of the Applied Energy, a scientific journal, and while it may focus on strategies for the nation's most vibrant renewable energy market, its conclusions could be of great value to utilities and policymakers nationwide as they move toward integrating more renewables on the grid.

“Several mitigation measures both increase in attractiveness with increasing penetration of wind and PV and increase the marginal value of wind and PV relative to a scenario without the mitigation measure,” the study concludes.

“Starting from a base case scenario with inflexible loads, not a lot of storage, a limited amount of geographic diversity, and so forth, the utility would assign a certain value to PV or wind,” said LBNL Staff Research Associate and report co-author Andrew Mills. “But if the PUC implements real time pricing, or if the cost of storage comes down, that will change what the utility would be willing to pay for renewables and this is an analysis of how much that would be.”

The most effective mitigation strategies

The loss of value of different variable generation technologies, said Mills, can be mitigated by a series different measures, but which ones work best depends on the resource. LBNL researchers addressed wind and solar PV in the study.

The best way to keep wind’s value high as it gets to 40% of the generation mixis with geographic diversity, Mills explained. But the best way to do the same for solar PV as it gets to a 30% penetration is with low-cost bulk power storage.

The analysis provides an estimate of how big a premium a utility might pay to have more wind or more solar if one or another of the mitigation strategies was implemented, Mills added.

A key takeaway, and one of the most surprising, Mills said, was thatgeographic diversity is not as important to solar PV as to wind. And low cost battery storage is not as effective at adding value for wind as it is for solar PV.

“Low cost storage increases the value of wind at a 40% penetration by only $4.40 per MWh, but it greatly increases the value of PV at a 30% penetration, by almost $20 per MWh,” he pointed out. “The mitigation strategy that was more effective for wind was geographic diversity.”

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Geographic diversity increases the value of wind at a 40% penetration by $10.60 per MWh while it has very little value to solar at any penetration.

The value of geographic diversity to high wind penetrations has long been so well established that Mills went into the research skeptical it would be different for PV. But the numbers showed there is “a pretty dramatic difference for solar and wind for the value of storage,” he acknowledged.

The two reasons, he believes, are the excessive level of midday generation, especially in the spring and fall when loads are lower, and the decline in solar PV’s capacity value as system demand peaks shift toward late afternoon or evening. The ability to store excess generation addresses during peak hours the first reason and utilizing that electricity in solar's off hours addresses the second.

“Those things have to do with when the sun is there, not with cloud cover or short term variability factors, which is what geographic diversity really matters for,” Mills said. “With wind, a plant at a distance may have a different wind pattern and a different generation pattern but a solar array still faces the same temporal profile of when sun is available.”

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Real time pricing

The impact of real time pricing (RTP) on variable generation depends on how dynamic the load is, Mills said. “If you have more responsive loads, RTP can be a fairly effective mitigation strategy for increasing penetrations of solar PV or wind but the overall magnitude isn’t as large.”

RTP leads to more frequent, but less severe, high prices. The marginal values of wind and solar increase if and when RTP increases the load during times when they are available, the study reports. “As the penetration of renewables increases, the loads essentially respond to that by shifting to when there are more renewables and out of the hours when there are less renewables,” it reads.

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The value of the mitigations

“The core focus of the research was to understand how implementing these mitigation strategies changes the value of renewables,” Mills said. "But the other side of that is whether the premium paid for the mitigation strategy also increases as the penetration of renewables increases.”

The research showed that innovative, highly flexible combined cycle gas turbines and affordable energy storage both increase in value as the penetration of renewables on a system increases. “In the case of PV,” Mills said, “there is a dramatic increase in the amount of storage you would build as PV penetration increases.”

The quick start CCGTs now being marketed by GE, Siemens, and others don’t seem to change the value of renewables very much, Mills said. But the units become more profitable when there are more renewables. “There is an increasing premium the utility would be willing to pay for a flexible CCGT unit with higher renewables penetrations.”

Though the metrics are more challenging, Mills said, the value of demand response similarly increases the value of renewables, while a higher penetration of renewables also increases what system operators would be willing to pay more for demand response.

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'A clear synergy'

“In all cases,” the study reports, “the mitigation measures look more attractive with variable generation than without it.”

“But that doesn’t go on indefinitely,” Mills said. "As you increase solar, it increases the value of having more storage. If you add more storage, that will increase the value of PV. But by adding storage, you also decrease the value of more storage.” It's a diminishing marginal returns thing.

Renewables increase the distance between the peaks and valleys of the load profile and the purpose of storage is to level the load profile, he explained.

“If you add storage, it flattens. And if you add more storage, it keeps flattening. But there is a correcting mechanism. At the right amount of storage, the marginal value of it will stop going up,” he said.

“But there is a clear synergy,” Mills said. “Increasing the mitigation measure increases the value of renewables and increasing renewables increases the value of the mitigation measures.”

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