TODAY’S STUDY: Modernizing The Power Grid With Flexibility
Grid Flexibility: Methods For Modernizing The Power Grid
Sonia Aggarwal and Robbie Orvis, March 2016 (Energy Innovation)
An abundance of new technologies are now available to produce cleaner, cheaper electricity. Many countries—for example the United States, China, and Germany—are deploying large amounts of solar panels and wind turbines. At the same time, information technology and advanced power electronics are hitting the grid around the world, giving grid operators visibility into and control over power flows and demand variability. Today, more than ever before, there is enormous potential to incorporate a great deal of low-cost, zero-emissions resources extremely efficiently. But in order to take advantage of these new technologies, system operators must develop new tools, market structures, and institutions to balance supply- and demand-side resources against one another dynamically. In short, they must build a flexible electricity grid.
The electric grid has always been somewhat flexible in order to meet variable electricity demand in every instant. But increasing variability and ramping requirements introduced by a cleaner, more modern power system means system flexibility is poised to become more and more valuable. Fortunately, there are many options available to increase grid flexibility in the shortterm, as well as the long-term.
This paper touches on the growing importance of grid flexibility, reviews the types of resources that can deliver it, describes case studies of how the United States has attempted to foster it, and concludes with options for how to incorporate and enhance grid flexibility.
Short-Term: Handling Contingencies And Building Operational Flexibility
Operational flexibility ensures that grid operators can meet daily, hourly, or sub-hourly fluctuations in supply and demand. In parts of the world with liberalized electricity markets, this kind of short-term operational flexibility has not traditionally been explicitly valued. Electricity markets have instead focused on ensuring the system has enough generators online at any given moment to meet uncontrollable electricity demand, selecting generators via an energy market based on lowest marginal-cost. Short-term variability has been handled by a relatively small parallel market for “ancillary services,” which typically comprise only around five percent of all the transactions in an electricity market.
These ancillary service markets often include products designed to support grid flexibility (such as operational reserves and regulation) and contingencies (such as voltage regulation and frequency response), but the primary concern of overall electricity markets has been to ensure adequate generation supply is dispatched in order of least cost to meet overall electricity demand. This gives little or no focus on the value of dynamically matching demand to available supply, and only minor attention to selecting supply with adequate capabilities to provide grid flexibility.
Part of the reason this kind of advanced operational flexibility has been largely neglected is that it hasn’t been much of an issue to date. Traditional approaches to resource acquisition and market operations have typically delivered the necessary flexibility to run the grid reliably.2 However, as the grid modernizes, technologies become available to cheaply manage electricity demand to meet available supply (rather than simply dispatching available supply to meet uncontrollable electricity demand). Variable clean energy sources will also become a bigger part of the electricity mix, thus operational flexibility will become more important. Indeed, some areas (such as Hawaii3 and California4 in the United States) that have high shares (20 percent or more) of electricity from renewable sources are beginning to see operational flexibility issues on the horizon.
Long-Term: Planning For Flexibility
As the overall resource mix evolves and new, clean technologies become a bigger part of the electric system, grid planners must begin to look several years out to ensure that sufficient flexible capacity is available down the road, either via direct mandates or through the right economic incentives.
In liberalized electricity markets it will be important to consider how to ensure the market delivers adequate flexible capacity in future years. Some liberalized electricity markets have introduced capacity markets alongside their energy and ancillary service markets to address concerns over resource adequacy. But traditional capacity markets have excluded considerations of flexibility, focusing instead on “firm” capacity, eschewing any consideration of the type of capacity that is being acquired; in other words, all megawatts are treated the same. As the electric system modernizes, though, the need to plan for adequate flexible capacity will grow.
The section below, titled “Case Studies and Options for Improving Grid Flexibility,” highlights ways to incorporate flexibility into near-term operations and long-term planning. But first, we will describe some of the operational changes and physical resources that can be used to provide low-cost flexibility today. RESOURCES FOR
Many different resources are already available to deliver grid flexibility on both the short-term operational timeframe and the long-term planning timeframe. Flexibility can come from physical assets, such as batteries and fast-ramping natural gas plants, but it can also come from improved operations, such as shorter dispatch intervals and improved weather forecasting. The lowestcost options fall into the category of improved operations, which can take advantage of existing infrastructure, making relatively small operational changes or introducing advanced information technology to more efficiently match electricity supply and demand. As illustrated in Figure 1, several physical options are available today, but they remain somewhat more expensive than improved operations…
As countries continue to deploy large amounts of variable renewable resources, an increasingly flexible electric grid will be required to take full advantage of these zero-emissions resources. As described in this short brief, there are many options to enhance grid flexibility—everything from short-term operational changes, to using advanced information technology, to developing and building flexible physical grid assets. Policymakers and market operators have an opportunity to lead the world into the age of the dynamic, flexible electric grid. As some countries begin to liberalize their markets—for example, China and Mexico—this moment of clean-sheet electricity market design is the perfect time to set the wheels in motion on flexibility.