Renewable Energy

Deck: 

Mandatory portfolio standards have different implications for different technologies.

Fortnightly Magazine - November 2004

The federal government and several state governments are considering programs to increase the share of electricity produced by renewable generation resources to 20 percent or more. If these programs are implemented and pursued successfully, they will trigger a dramatic change in the role of renewable generation and the requirements placed upon it by the market.

State by state, or region by region, renewable generation must transition from a "source of opportunity" to a consistent, reliable source of power as the percentage of renewable generation exceeds the "reliable source" generation capacity reserve margin. This transition has different implications for the various renewable generation technologies.

The U.S. electric reliability concerns extend from generation, through transmission and distribution, to the point of consumption. The issue is complicated by industry restructuring and the emergence of a competitive wholesale market for electricity, which is altering historical supplier/customer relationships and historical power transmission paths. Continued U.S. population growth and resultant increases in electric consumption and demand, as well as proposed CO2 emissions caps and reductions could further complicate the electric reliability scenario.

The U.S. population growth of approximately 1.3 percent per year would result in a doubling of population every 50 years and approximately 500 million U.S. citizens by 2050. U.S. energy consumption is growing slightly faster than population, at approximately 1.5 percent per year; electricity consumption is growing at approximately 2 percent per year. Thus electric consumption could increase approximately 150 percent by 2050.

Approximately 70 percent of U.S. electric production is provided by fossil-fueled generation (including biomass), which results in the production of CO2 and a variety of air pollutants. Concerns about global climate change have resulted in proposed reductions in CO2 emissions, which could have a dramatic effect on the current and future generation mix.

Renewable Energy Resources Today

Renewable energy resources provide approximately 10 percent of U.S. electricity consumption, representing approximately 4 quadrillion BTUs (quads) of annual energy consumption. Hydropower (2.7 quads) is the largest renewable electric source, followed by biomass (0.7 quads), geothermal (0.3 quads), wind (0.1 quads), and solar (0.06 quads).

Renewable electric generation resources can be categorized either as "reliable sources" or "sources of opportunity." The "reliable sources"-geo-thermal and biomass-can be used to produce base load power. The "sources of opportunity"-solar and wind-can be used when available and replaced by conventional generation when not.

Hydroelectric generation provides a combination of both reliable-source and source-of-opportunity power; some portion of hydro capacity is always available, while the remainder is available only to the extent that weather conditions in the watershed feeding the facility have been wetter than historic lows.

Treating solar and wind resources and a portion of hydroelectric capacity as sources of opportunity avoids the complications and expense of developing multiple, redundant renewable generation sources or electric energy storage for use during periods when one renewable generation resource is unavailable because of local wind or weather conditions.

Wind Generation: A Storage Issue

Wind generation likely will be the most severely affected renewable generation technology as a result of this transition. According to the American Wind Energy Association, eight to 10 wind generators of a given capacity, installed in carefully matched locations, are required to ensure reliable availability of the capacity of one of the generators 8,760 hours per year. In most cases, with eight to 10 generators available for service, capacity greater than the capacity of a single generator would be available; however, while that additional capacity could be used when available, it could not be relied upon. The number of individual wind generators required could be reduced if the capacity of the individual generators were increased and the installation were accompanied by adequate electric storage capacity.

Wind generation cost would also be severely impacted by the transition to "reliable source" status. The cost of wind energy would no longer be based on the cumulative output of a single wind generator and its cost of ownership, but rather on the reliable output of a group of 8 to 10 wind generators and their associated storage and the cost of those aggregate facilities. Generation output over and above the reliable output of the aggregate facilities will have some reduced value, since it must be backed-up by spinning reserve or must be linked to loads that can be rapidly and reliably removed from the grid when the power output of the wind generator is not available.

Wind generation is probably also the most rapidly variable of the renewable sources. This would tend to complicate the transmission grid reliability management problem, since individual wind generator output can vary quickly and the transmission grid and other generation resources must be able to respond as required to follow the system load. This complication could be relieved to some degree by the availability of adequate storage capacity capable of frequent, deep cycling.

The application of wind generators also has implications for the design of the electric transmission system, which must be capable of adjusting automatically and quickly to the total availability of wind generation and the magnitudes and locations of the power feeds into the grid.

Wind energy systems also are experiencing increasing resistance because of their appearance and the potential harm to certain types of birds that fly into the path of the blades. NIMBY concerns have been raised very recently concerning a proposed offshore wind farm in the Northeast. The requirement for multiple wind turbine installations in selected locations to achieve adequate reliability complicates this issue by increasing both the number of required wind turbines and the number of locations that must be reviewed and approved.

Solar: Not 24-7

Solar electric generation generally is considered to be available a maximum of 6 to 8 hours per day, depending on location and time of year. However, solar energy may not be available for several hours on a given day, or even for several days, depending on weather conditions at the collection location. Thus, solar generation must be accompanied by storage sufficient to meet power demand during the diurnal periods when solar energy is not available, as well as during daily periods when solar energy is not available for collection in adequate quantities. Electricity available from the solar field in excess of the reliable capacity requirements could be sold at a lower price when storage is full and demand is available to be served.

The requirements of reliable source operation increase the investment required in solar generators to cover the cost of excess generation capacity to charge storage and the cost of the storage system and its operation. The reliance on storage also decreases net generation, as the result of losses experienced moving electricity to and from storage.

Hydroelectric Generation: Siting and Other issues

Hydroelectric generation is significantly more stable than wind or solar, and its output can be adjusted to follow changing loads if desired or required. On the other hand, when hydro is unavailable it tends to be unavailable for several months or even years at a time, as the result of droughts or low snow pack. This means that some portion of hydro generation capacity must be backed-up by conventional generation, which can be used to supply power while the hydro generator is partially unavailable. However, this conventional generation is typically not viewed as a component of reliable hydroelectric generation capacity.

Hydroelectric generation also is limited by the availability of major hydro sites and the reluctance of environmentalists to have additional hydro re-sources developed because of impacts on fish populations and other wildlife. Thus, it is unlikely that the hydro contribution to the U.S. generation mix will increase substantially in the future.

Biomass: Beware of Limits

Most biomass generating capacity is considered reliable, since there is ample unused biomass available to fuel the biomass generating facilities. However, the current and projected demand for biomass for the production of fuel ethanol may constrain the availability of biomass for the expansion of biomass-fueled electric generation. Biomass generation also may be constrained in the future by proposed CO2 emission limits.

Geothermal: A Journey to The Center

Geothermal generators are the most reliable and predictable of the renewable sources of electric generation. Thus, geothermal generation will be the least affected by the transition to reliable-source status, since it has effectively achieved that status already. Potential geothermal resources are very large, and it is likely that geothermal generation will make a substantially larger contribution to the U.S. generation mix in the future, if access to drill hydrothermal resource wells is available; and, if the technology and market prices permit economic access to "hot dry rock" sources of geothermal energy. Hot, dry rock geothermal sources are projected to be adequate to provide all U.S. electric demand and consumption for tens of thousands of years. However, these sources require deep drilling into high-temperature rock formations, which increases project investment and thus project energy costs.

California's Experience With Reliable Renewables

The recent power availability problem in California was fundamentally the result of the combination of reduced capacity reserve margins within the total generation fleet serving the state and reduced availability of hydroelectric generation capacity as the result of both increased water demand and protracted drought. In the California electricity market of 2001, a substantial portion of total hydropower capacity had transitioned from "source of opportunity" to "reliable source" status, based on historical water availability; and, then, a portion of that "reliable source" capacity became unavailable when water availability declined below historical minimum levels.

The power availability problem became a power price "crisis" in the restructured California electricity market with the addition of: (1) opportunistic pricing by power suppliers; (2) the inability of the distribution utilities to pass the increased prices in the wholesale electric market to retail market customers; and (3) alleged efforts by some of those suppliers to manipulate the market for their gain. It remains to be determined through the judicial system whether these alleged manipulations were illegal, or simply unethical, or in some cases not manipulations at all but merely market arbitrage.

One of the approaches used to control the high price of power in the California market was the imposition of price caps for wholesale electric power sales. While the price caps might have been somewhat effective in the short run in limiting electricity prices in the wholesale market, they might have a negative effect on the market long term. Investments in conventional generating capacity to serve markets normally reliant on hydroelectricity, during periods of limited hydro availability due to drought, are relatively high risk, since the generating capacity is typically used only when adequate hydropower is not available.

Thus, in many years, the conventional capacity may not be used at all, or only during extreme peak-demand conditions, or to replace other units taken out of service for maintenance or repairs. The cost of the first megawatt-hour of power produced by these generators in any given year is extremely high. The imposition of market price caps increases the risk that the return on limited hours of operation may be insufficient to cover the costs of ownership of the facility.

The New Paradigm

Government efforts to significantly increase the role of renewable electric generation will have a major impact on how wind and solar are applied in the market when the renewable generation capacity exceeds the reliable-source generation capacity reserve margin in the market. At that point, these renewable generation technologies must be configured as reliable-source generation. This will require significant increases in investment per megawatt of reliable generation installed, compared with the source-of-opportunity investment levels, for solar and wind generation. Hydroelectric resources also will have to be re-evaluated to determine the portion of their capacity considered reliable.

Early in the transition, renewable generation may be matched with electric loads that can be shed rapidly and automatically when power demand exceeds supply. However, if the transition to renewable generation increases wind- and solar-market share significantly beyond the reliable capacity reserve margin, major investments in renewable generation supply reliability will be required to maintain the stability of the grid. Much of this investment will be in "redundant" capacity, to ensure sufficient generation capacity available to meet market demand, regardless of regional weather patterns or hydrological conditions. With the availability of cost-effective electric energy storage technology, some of this generation investment may be offset by storage investment.

The expansion of electric generation from volatile source-of-opportunity generators, such as current solar and wind generators, will further complicate the redesign of the transmission grid to increase its flexibility to deal with rapid changes in the magnitude and location of power inputs to the transmission system. This issue will become more complex as the percentage of volatile source-of-opportunity generation increases, until the transition of these sources to reliable sources occurs.

Endnotes