The Impact of Wind and Solar on Wholesale Power Markets and Generation Assets in the US

By Ryan Wiser, Andrew Mills, Todd Levin, Audun Botterud (edited by Pol Olivella-Rosell) 8. February 2018

Recently, IEEE Smart Grid published a summary about The Impact of Wind and Solar on Wholesale Power Markets and Generation Assets, a US Electricity market price analysis focused on the influence from Variable Renewable Energy (VRE) production.

The following is a collection of highlights of the article and some comments from Pol Olivella-Rosell.

About price influence from VRE, authors state:

“We found that negative prices were more common in areas with significant VRE and/or nuclear generation along with limited transmission, and typically occurring during periods of lower system-wide load.”

“For instance, Quad Cities (a nuclear power plant in Illinois in a region with significant wind resources) and Southern California (with a growing amount of solar) experienced negative real-time prices during 8% and 7% of the hours in 2016, respectively.”

However, “VRE Impacts on Average Wholesale Prices Have Been Modest.”

For the ERCOT and CAISO cases:

“However, our analysis demonstrated that the impact of VRE on these declines in region-wide wholesale prices was limited.”

“It was found that growth in VRE generation contributed less than 5% to the overall price decline over this period, whereas natural gas price reductions contributed 85-90% of the overall decline.”

About fossil and nuclear plant retirements:

“Given the relatively modest impact so far of VRE on average annual region-wide wholesale electricity prices, it is not surprising that we did not find evidence that VRE has impacted power plant retirements to a significant extent.”

About future impacts with VRE penetration incresae:

“Though impacts may be limited to date, that is not to say that future impacts will be similarly modest. A review of studies assessing future impacts of VRE on electricity markets demonstrate that still-higher penetrations of VRE will tend to:

  • require additional VRE and non-VRE capacity, flexibility, and reserves,
  • alter the temporal and geographic patterns of wholesale electricity prices,
  • reduce wholesale electricity prices and potentially increase ancillary service prices,
  • reduce the average capacity factors of dispatchable thermal generating units,
  • reduce the revenue and operating profits of less-flexible thermal generation units, and
  • reward flexible (both existing and new) generators over less-flexible and…
  • reward flexible (both existing and new) generators over less-flexible and high-capital cost units.

The speed and magnitude of these effects will depend on how quickly the generation portfolio adapts to the higher VRE penetration levels.”

Authors conclude that:

“Key response strategies include power system flexibility provided by generation, load, transmission, storage, operational procedures, and market design. Some of these measures come at a low cost or even convey additional benefits. Other measures will come at a higher cost, requiring careful assessment before implementation.”

Pol Olivella-Rosell. CITCEA-UPC

Some insights for INVADE H2020 Project:

It seems clear that authors highlighted the importance of flexibility in the near coming power system operation to handle high VRE penetration scenarios. The solution will include several measures in which flexible load and storage will be part of.

This article is an important insight for the INVADE project even if it is from the US perspective. Flexibility platforms will be needed in a few years, that is for sure!

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