The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Balance of Power
Large grids can integrate more wind—without major burdens.
The desire of policymakers to add significant amounts of renewable energy to the generation mix is well understood. It’s also widely known that because the output of renewables such as wind power can be highly variable, power system operators have concerns about the ability to economically and reliably integrate these resources with system operations. Fortunately, a large body of knowledge has been developed in the last few years about integrating wind.
Despite their variable nature, renewable resources like wind and solar can be managed so they won’t impair the reliability of a utility system.
Given the diversity of resources and likelihood of improved forecasting of the output of these resources, it might be possible to reduce the need for quick-start and spinning operating reserves because the availability of the variable resources may actually offset unplanned variations in retail power demand. For this reason, it’s important that wind developers focus on working with existing balancing authorities rather than developing wind-only balancing authorities, which tend to have challenging economics.
Balancing authorities are the responsible entities that integrate resource plans ahead of time within specific service areas; they need to be attentive to their ability to meet control performance requirements (CPR) in the 10-minute timeframe as renewable capacity comes on line. This can be done with considerably less new investment than many market participants might think.
A key concern involves the basic need to maintain a balance of generation and load. Both can be subject to unexpected changes that aren’t necessarily exclusive to renewables, such as when a base-load steam plant suddenly trips off-line and 800 MW disappears, or when cold weather moves through an area 12 hours ahead of the forecast and causes an unexpected and rapid increase in power demand. While wind typically ramps down or up in unanticipated ways, it isn’t as problematic as dealing with a large generator that suddenly goes offline, and the variability of wind isn’t viewed as creating the type of frequency fluctuation problem that such an outage would cause. (See sidebar “Balancing Authorities and Frequency Control.”) A recent report funded by the Federal Energy Regulatory Commission (FERC) acknowledges this when it “clarifies that the events the interconnection is expected to withstand and the set points for under-frequency load shedding will not be affected by integrating variable renewable generation.” 1
FERC, Reliability and Renewables
FERC plays a major role in the integration of renewables. The agency must approve reliability criteria, including requirements that affect their integration, and must approve tariff provisions related to open access of transmission.
FERC received many responses to its January 2010 Notice of Inquiry seeking comments on barriers to the integration of renewables to the grid. On Nov. 18, 2010, FERC issued a notice of proposed rulemaking in Docket RM10-11, proposing, in part, to require public utility transmission providers to offer all customers the option to schedule transmission service at 15-minute