Published on May 14th, 2016 | by Guest Contributor57
Debunking 4 Myths About The Clean Energy Transition, Part 2: Excess Generation
May 14th, 2016 by Guest Contributor
This is part 2 of a 4-part series — see also Myth #1: The Duck Curve limits renewables integration, Myth #3: Clean energy increases consumer costs via higher rates, and Myth #4: Natural gas is the main reason for decreased emissions.
America’s electric system is at a stark inflection point: coal power plants are operating at all-time lows with growing retirements, natural gas prices are at historical lows while power generation is rising, electricity sales are flattening, extreme weather events are forcing more resilient infrastructure, and plunging renewable energy prices have made low- or zero-carbon sources cost-competitive with conventional fuel sources.
Rapidly reducing greenhouse gas emissions from the electricity sector is now possible without radically disrupting grid operations, costs, or reliability. But the grid will require a more substantial transformation as we rely on higher shares of variable renewable generation. Some critics argue technological, financial, and institutional barriers will prevent significant decarbonization in the electricity sector, or will drive up the costs at the very least. But four common clean energy myths are easily debunked by facts and experience that show a low-carbon energy future is possible without sacrificing affordable, reliable service.
Myth #2: All Excess Generation Must Be Curtailed Or Stored
Reality: Overgeneration can be sold into other markets
In the same way that renewable energy generation can fall short of demand (as described in Myth #1), it may also sometimes exceeds demand, particularly as shares of renewable generation increase. This forces grid operators to consider what to do with the excess electricity. Some believe any electricity generated above a region’s demand is wasted — it must be shut off, or “curtailed,” to avoid flooding the system with more supply than it needs. While it is true that overgeneration can cause reliability problems, curtailment is often an unnecessary and expensive option.
When examining renewable generation, it’s important to consider variability across multiple regions. Though renewable energy policies are often made at the state level, the physical electricity system is interconnected over much larger areas. Independent System Operators (ISOs) typically manage and trade electricity in broad multi-state markets, some of which even allow trading with other regions. With adequate transmission capacity, much of the curtailment problem can be mediated by real-time trading.
In practice, many operator regions already sell their electricity to other regions, helping spread out the costs of generation. For example, in 2015, Germany exported roughly 85 TWh of electricity — 18% of its total generation — to surrounding countries (including Austria, Switzerland, the Netherlands, and others) for a total value of €3.6 billion. Rather than being curtailed, Germany’s excess generation went to meet demand in neighboring regions, generating a trade surplus in the process.
California, which already imports roughly one-third of its electricity, is currently developing an Energy Imbalance Market (EIM) to expand and improve electricity trading. Today, the EIM, covering more than 35 million customers across 8 states, allows for trading between the California Independent System Operator (CAISO) and two utilities — Pacificorp and NV Energy. Two additional utilities are expected to join by 2017, and two more are currently exploring the benefits of joining as well.
The EIM only provides a market for short-term power deficits and excesses, reducing the need for seldom-used “peaker” plants to balance supply and demand in real-time. But even at such a limited scope, the EIM improves access to cheaper balancing services across a broader geography, allowing utilities and their customers access to the cheapest resources over a wide area. Importantly, this means low-cost excess renewable generation that otherwise would have been curtailed now can serve a larger marketplace. In CAISO’s EIM alone, this will produce approximately $70–200 million in annual savings.
Electricity trading is a valuable tool to manage deficits and excesses and is, for example, one reason Denmark has been able to meet over 100% of its electricity needs with wind power on certain days without curtailment.
Numerous studies affirm regional trading both significantly reduces curtailment and also creates value for surpluses of renewables. For example, the Low Carbon Grid Study considers technologically and geographically diverse renewable energy portfolios and bulk storage shared across multiple balancing authorities and utilities to be critical components to reducing curtailment. NREL’s Renewable Energy Futures study and NOAA provide additional insight into incorporating high shares of renewables onto the grid and the value of trading electricity.
Pulling It All Together
Accurately estimating the cost of electricity sector decarbonization is undoubtedly a difficult endeavor because of rapid cost declines, myriad technologies, market operations, and other nuances. Institutional inertia favoring an outdated system further clouds this picture.
Nevertheless, it is increasingly clear that today’s available technologies and options can successfully decarbonize the electric sector. In order to cost-effectively achieve the goals many states and countries have laid out, policymakers must have the best available information, and use it to guide policymaking.
Moreover, today’s economy is extraordinarily favorable for investment in renewable resources to make the leap policymakers know is necessary to avoid catastrophic climate effects. Low natural gas prices and the proliferation of energy efficiency technologies mean that utility bills will be kept low, providing a cushion for early investment in renewable resources. The cost of money is at an historic low, encouraging renewable developers to invest. And finally, federal tax incentives for solar and wind power are at peak levels.