White Papers New Age Energy Markets - Challenges for Utilities, | Page 4

New Age Energy Markets - Challenges for Utilities, IPPs and Traders

A ComTechAdvisory Whitepaper

Renewables now account for about 13% of the total US
installed capacity; however, the majority of that capacity is concentrated in a few states and regions, and particularly in California, Texas and the Southeast Power Pool (SPP). In these
state and regional markets, power from renewables (particularly wind in Texas and the SPP, and solar in CAISO), can
reach a third or more of the power generated in a day. With
the highly variable nature of these energy sources, grid operators are challenged in managing grid stability as a significant
portion of their capacity rises or falls with the winds or during
periods of cloud cover on any given day.
For California’s grid operator, the CAISO, that state’s
promotion of solar energy via incentives and tax credits has
created a two-tiered solar infrastructure – utility-scale concentrating solar plants (CSP) and distributed roof-top (or behind-the-meter) solar. While the CSPs are operationally visible
to the grid operator and are dispatchable, the roof top systems
now common in the state are essentially invisible and unmeasurable on the system. Without that visibility into a growing
source of generation, the grid operator has difficulty predicting
market demand, leading to significant locational marginal pricing (LMP) volatility and increased transmission congestion as
the load changes unexpectedly during the day and throughout
the year, particularly during the summer months when system
loads are at their highest and the state’s wind generation tends
to be at its lowest.
Texas too has experienced difficulties integrating the massive influx of renewables, as power from new wind generation
farms in West Texas have occasionally swamped the states
transmission lines and driven out other competing sources.
With almost 18,000 MW in wind capacity at the end of 2015,
wind accounted for 9% of Texas’s total generated power for
the year. However, given the price advantage wind enjoys with

production subsidies, wind farms have at times accounted for
as much as 50% of the total energy generated at any given
time, creating negative prices in the real-time markets. With a
significant financial advantage, wind can continue to operate
profitably in negative prices, forcing other sources, such as gas
and coal, to quickly ramp down production or “pay to run”.
California is also seeing increasing periods of negative pricing as solar continues to invade that market region. In 2015,
the CAISO saw about a dozen days of negative prices, reaching a low of ($23.87) MWH. In all these and other markets
(like the Northwest region which is dominated by cheap-to-run
hydro), the further integration of financially advantaged renewables such as wind and solar, despite their rather unpredictable nature, will result in increasingly frequent periods of negative pricing.

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