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3Rs for Power And Demand

Dynamic monitoring and decision systems maximize energy resources.

Fortnightly Magazine - December 2009

addition, at the investment stage, wind power plants are almost universally entitled to clean credit tax breaks of some sort.

While it might appear at first look that it’s not necessary for the 3Rs to specify the mechanisms for implementing highly technical functions, such as short-term unit commitment, economic dispatch, mid- and long-term forward capacity and energy commitments in the changing industry, the details of this being done have great implications. Financial bilateral deals are viewed, by and large, as being sufficient for ensuring long-term energy and capacity, and as separable from engineering planning and operating rules; their implementation is considered better left to the system operators and engineers. However, industry experience to date has shown that long-term bilateral contracts fall short of being utilized to their capacity when scheduling is done by the system operators whose prime objective is system reliability without taking risks.

One possible way to bridge this gap between contracted capacity and actual energy use would be to design and implement regulatory rules that support managing physical and financial risks in qualitatively different ways than is being done today. Moreover, given the highly technical system operations, and the temporal and spatial complexities, aligning financial and physical risks probably isn’t achievable without on-line information about what’s available with high certainty, by whom and to whom. 1 Aligning financial and physical risks would require the 3Rs to specify the minimal information exchange necessary among resources, aggregators, system operators and regional coordinators. This exchange is essential for ensuring just-in-time (JIT) and just-in-place (JIP) utilization of existing resources, as well as systematic commitments to ensure mid- and long-term sustainable electricity services. In addition, the information has to be both technical ( i.e., regarding quantity, time and location) and financial ( i.e., willingness to pay or get paid), and must be binding.

Rethinking the way risk is managed would considerably impact predictions concerning long-term energy resources, which fundamentally are based on coarse estimates of available capacity and, at best, on long-term available average energy (see Reference 1) . These estimates, as a rule, don’t take into account the possible enhanced utilization of existing resources by more dynamic JIT and JIP predictions and adjustments. Instead, they’re based on current (N-1) reliability criteria, which require a large reserve to meet the long-term system peak-load forecast even during worst-case forced equipment outages. A quick assessment of the actual load and the planned load shows that the actual load is generally much lower except during some very short infrequent time intervals. This means that the probability of utilizing full capacity is very low, and the resources are, by and large, under-utilized. This discrepancy has huge effects on what gets built and operated relative to what would be needed if the burden of forecast were distributed across all market participants, and if power producers and responsive demand were given the opportunity to manage their own objectives under uncertainties by offering binding self-committing supply and demand bids, respectively.

Groups of resources are in a much better position to provide the information about what is possible to produce and when,