Overcoming Challenges To Integrating Renewable Energy Resources

1. Overcoming Challenges To Integrating Renewable Energy Resources Paul Roberti, Commissioner Rhode Island Public Utilities Commission May 16, 2013

2. Renewable Integration Challenges in New England Are Regional In Nature • Independent System Operator of New England (ISO-NE) • Responsible for: • Ensuring regional reliability • Administering electricity markets • Regulated by Federal Energy Regulatory Commission

3. New England’s Electric Power Grid at a Glance • 6.5 million households and businesses; population 14 million • 350+ generators • 8,000+ miles of high-voltage transmission lines (115 kV and above) • 32,000 megawatts of total supply and 2,000+ megawatts of demand resources • 28,130 megawatts all-time peak demand, set on August 2, 2006 • 500 participants in the marketplace • $5 billion total energy market value in 2012

4. Fuel Mix for New England – 2012

5. Generator Proposals in the ISO QueueApproximately 5,000 MW looking to connect to the New England system – Greater than 50 Percent are Renewable Energy Resources

6. Challenges Posed by Greater Levels of Variable Resources • The region’s aging generation fleet and uncertain performance of demand response resources has increased the need for system operations flexibility – both system wide and locationally • As traditional units retire or are too expensive to run, and variable resources increase on the system, the system operator will need more resources that have quick-start capability, fast ramp rates, and are dispatchable across seasons • Wide spectrum of solutions available, some already underway, each with unique costs and complexities. For example: • Increase system reserves • Enhance performance incentives and penalties in wholesale markets • Negative pricing for energy market offers • Integrate wind forecasting into commitment and dispatch

7. New England Renewable Energy Targets, 2021 Today, MA accounts for 46% of the region’s total electricity consumption; CT 25%; RI 6% With passive demand response forecasts (11.6% energy reduction in 2021), LSEs would need renewables to provide 20.2% of projected electric energy use to meet existing targets. By 2021, 31.8% of region’s projected electric energy consumption could be met by EE, RPS targets, and related renewable goals. Source: ISO-NE RSP 2012, p. 135, 138-139.

8. New England Generator Interconnection ProposalsApproximately 6,000 MW proposed; over a third are wind projects

9. Challenges for Wind Development Population and electricity demand concentrated in southern New England No overlap between wind resources and high energy demand areas Transmission investment would be required for large-scale wind integration

10. New England Wind Integration Study (NEWIS)New England-focused wind integration analysis • Large-scale wind integration in New England is technically feasible • Regional requirements: • Maintaining flexible resources to manage variability • Transmission upgrades • Increasing regulation service and operating reserves • Developing wind forecasting tools

11. Challenges of Wind Integration • The ISO is unable to dispatch wind resources today. • Unit dispatch software is unable to send dispatch instructions. • Non-dispatchable resources (which includes wind) are ineligible to set price. • Market/operations protocol used to determine curtailment priority generally results in wind being curtailed before other resources. • Inability to submit negative energy offers gives competing resources little incentive to reduce output when congestion occurs. • System operators must rely on manual actions to ensure reliability. • Improved short, medium, and long-term forecasting tools are needed. • Full integration of wind resources into automated market and dispatch systems is needed.

12. Addressing the Challenges of Wind Integration • The ISO is developing market and infrastructure improvements: • Allow negative energy offers • Make wind resources dispatchable and eligible to set price • Calculate and send out a do-not-exceed (DNE) limit to each wind plant on dispatch • The DNE limits will reflect several characteristics of each plant: • Economic offer curve • Maximum output under ideal weather conditions • Short-term wind output forecast • Transmission constraints • Telemetered physical status for the next dispatch interval • A wind plant will be free to operate anywhere between 0 MW and the DNE limit

13. Addressing the Challenges of Wind Integration cont. • A centralized, regional wind power forecasting system is scheduled to be in service in early 2013. • All wind resources will be required to provide real-time telemetry indicating current output and weather conditions. • Improves system operator’s situational awareness • Enable ISO’s real-time automated communication of dispatch instructions • Enhances the quality of the centralized forecast • More flexible structure for hourly day-ahead energy offers and intraday reoffers is being developed. • Reduces the desire to self-schedule, giving system operators more flexibility to integrate renewable energy resources • Increases the percentage of resources dispatched economically • Better for efficient system operation as a whole

14. Addressing the Challenges of Wind Integration cont. • Potential increase in regulation requirements as more wind resources interconnect to the grid • Current hourly requirement averages ~60 MW • Could increase to ~300 MW if wind penetration increases to 20% of annual energy • New England currently has 800+ MW of regulation capable resources • Forward Capacity Market issues under consideration • Pay-for-performance incentives • Identification of operational needs of resources to be acquired in the capacity auction

15. Current Situation • Wind resources and other Intermittent resources are “non-dispatchable” • Unit Dispatch Software (UDS) is unable to manage congestion by sending dispatch instructions • Wind resources not eligible to set price in LMP calculator • System operators must manually curtail resources if necessary to ensure reliable operation of the grid • Anticipated wind production generally not reflected in unit commitment for real-time • Manually curtailing non-dispatchable resources when required to manage congestion does not result in price separation • Non-dispatchable resources are effectively zero-priced • Resulting LMPs are inconsistent with “dispatch” decisions to curtail zero-price resources

16. Existing RT Curtailment Procedure • When economic dispatch is insufficient to manage congestion, priority goes to resources that cleared or self-scheduled in Day-Ahead. • As a practical matter, this leads to economically inefficient outcomes • Renewable energy credits and production tax credits result in wind plants having a negative energy price • Interconnections on weaker portions of the grid, and fast ramp rates mean wind plants are typically curtailed more frequently than other resource types

17. Existing Manual Procedure Will Not Be Adequate Going Forward • Lack of real-time telemetry and uncertainty about anticipated wind output lead to: • More conservative operating practices and limits • Less optimal resource commitment • Suboptimal dispatch and inappropriate pricing • Low cost resources may be curtailed before higher cost resources • Manual curtailments to manage congestion don’t result in price separation • With higher wind penetration, system operators with only manual dispatch & curtailment procedures will be overloaded during dynamic weather conditions

18. Near Term Improvements • Wind short-term forecast – early 2013 • An accurate forecast is critically dependent on wind resources providing detailed plant data ASAP • OP-14 & OP-18 – real-time telemetry from wind plants • Both of these: • Greatly improve operator situational awareness • Reduce uncertainty • Improve commitment and dispatch of all resources • Make possible a real-time “Do Not Exceed” (DNE) dispatch of wind resources

19. Wind RT DNE Dispatch - Objectives • Secure, reliable, and efficient operation of the system through normal economic dispatch of the system. • Reduced need for manual curtailments of non-dispatchable resources. • Improved opportunities for wind production • Allow wind resources to impact energy prices in a manner consistent with their economic value and energy market offers.

20. How Will Wind RT DNE Dispatch Work? • UDS will calculate and send out a Do Not Exceed limit to each wind plant on dispatch • The DNE limits will reflect • Economics • Constraints • plant status (RTHOL and persistence) • high-confidence “next 5 minutes” wind output forecasts • Will consider both energy balance (i.e. gen = load) and reliability • Will allow price-based congestion management based on offer parameters • Contemplates the eventual introduction of negative energy offers

21. How Will Wind RT DNE Dispatch Work? (cont.) • Wind plants will be considered “following dispatch” if operating between 0 MW and the DNE limit and not exceeding ramping limits. • Output can vary with changing weather conditions • Downward ramps due to plant emergencies and/or decreasing wind not counted for “following dispatch” • Will allow wind plants on dispatch to be eligible to set price • Accurate forecasts and frequent telemetry should reduce curtailments and provide greater opportunity to maximize output. • Will prevent “manual procedure” overload for system operators

22. Who is Affected and When? • No one is affected until the DNE dispatch software can be implemented (estimated for 2014) • ISO efforts have been unable to identify a feasible way to dispatch wind manually • Once software is in place, DNE dispatch may be optionally selected by wind plants through their offer data • DNE dispatch is planned to become mandatory when negative energy offers are implemented, for wind plants that meet one or more of the following conditions: • Interconnect to a transmission facility or a FERC jurisdictional distribution facility • Has a Capacity Supply Obligation • Is a Capacity Network Resource • Has a total nameplate capacity at the point of interconnection of >= 5 MW

23. How Will a Wind Plant Participate • Submit an economic offer curve into the Day-Ahead or Real-Time Energy Markets • Must be providing all weather and plant data required by recent OP-14 & OP-18 changes • This data supports the forthcoming real-time wind forecast system • Accurate real-time wind production forecasts are critical to effective operation of the DNE dispatch • No requirement to offer into Day-Ahead • Self-scheduling will continue to be permissible while Wind RT Dispatch is voluntary. • Assuming a dispatchable wind plant offers $0 commitment costs, it will be treated as “committed” whenever available (i.e. RTHOL > 0) • Otherwise, must offer & clear in DA, or self-schedule in RT

24. New England’s Current Implementation Plan • Voluntary Wind RT DNE Dispatch – mid-2014 • Market rules being presented today address only voluntary DNE dispatch • Implementation on a voluntary basis provides some early operational/reliability benefits, but will not fully resolve pricing and congestion management issues until all wind plants are responding to DNE dispatch instructions • Becomes mandatory when negative offers are implemented. • Likely not until 2014 or 2015 • Will require a separate rule change at that time

25. THANK YOU Paul Roberti, Commissioner Rhode Island Public Utilities Commission 89 Jefferson Blvd. Warwick, RI 02888 Tel: (401) 780-2147 Email: proberti@puc.state.ri.us