High levels of wind and solar on the power grid could lower wholesale electric prices
Energize Weekly, June 6, 2018
High levels of wind and solar on regional power grids can decrease electric wholesale prices by $5 to $16 a megawatt-hour (MWh), according to a study by the Lawrence Berkeley National Laboratory.
“Increasing penetrations of variable renewable energy (VRE) can affect wholesale electricity price patterns and make them meaningfully different from past, traditional price patterns,” the study, Impacts of High Variable Renewable Energy Futures on Wholesale Prices, and on Electric Decision Making, said.
“We find a general decrease in average annual hourly wholesale energy prices with more VRE penetration, increased price volatility and frequency of very low-priced hours,” the study said.
The study simulated wind and solar reaching 40 percent to 50 percent on regional power grids in California, Texas, the Midwest and New York State.
In all four areas, the addition of more renewable energy lowered prices and increased the number of hours in which wholesale electricity was less than $5 a MWh. That effect was most pronounced when the mix was 30 percent solar and 10 percent wind.
The study looked at mixes of 30 percent wind and 10 percent solar, 20 percent wind and 20 percent solar, and 10 percent wind and 30 percent solar.
“Since solar and wind have no fuel costs, they can bid low to make sure their power is accepted in the market. The more wind and solar in a market, the more often the clearing price falls,” the study authors said in a presentation. “In today’s markets, we already see sometimes prices go to zero or even negative.”
The renewables, particularly solar, also shifted the peak demand in three of the four systems from the afternoon to the evening.
On Texas’ ERCOT grid, the peak shifted from 3 p.m. to between 6 p.m. and 8 p.m. In the Southwest Power Pool, it went for 4 p.m. to 7 p.m. In New York, it shifted from 3 p.m. to between 5 p.m. and 7 p.m.
There was no change in California, which already had 14 percent solar and 7 percent wind in 2016. These new “net peaks” are also shorter in duration, but are distributed over more days of the year, the study said.
The analysis also projected that there would be a retirement of 4 percent to 16 percent of baseload capacity, especially coal, oil and steam turbines. Natural gas would also be displaced, and total carbon emissions will drop by 21 percent to 47 percent.
The addition of renewable resources, however, also led to more volatility in prices. The low VRE scenario had a variation of $5 to $10 a MWh around the season mean wholesale price. The high wind scenario widened the range to $20 to $30 a MWh, with the potential for energy prices in the morning at zero on some days and up to $55 MWh on others.
The range for a high solar scenario and the mixed scenario were not as great as for wind, but they were still wider than the low renewables scenario.
The analysis also found that the cost of ancillary services, which are needed to support transmission and generation, also will rise as average ancillary services in all the high VRE scenarios are higher than in the low VRE scenarios.
Ancillary services include spinning reserves—online reserve capacity to synchronize the grid, energy imbalance, scheduling, control, and dispatch and voltage control.
The Berkeley analysis found an increase for all regulation and spinning products by a factor of 2 to 8, or $15 to $38 a MWh.
“Our study shows how solar and wind tend to lower energy prices, but they add new complexity for operating the grid, which has big implications for regulators,” the study authors said. “For consumers, this research is a reminder that making the electricity grid cleaner with wind and solar is an evolving process that requires significant changes to how the power grid is currently run.”