This report was prepared for Advanced Energy Economy Institute.

I. Executive Summary

A number of factors are contributing to increases in renewable energy production in the United States (and beyond). These factors include rapidly declining costs of electricity produced from renewable energy sources, regulatory and policy obligations and incentives, and moves to reduce pollution from fossil fuel-based power generation, including greenhouse gas emissions. While not all renewable energy sources are variable, two such technologies – wind and solar PV – currently dominate the growth of renewable electricity production. The production from wind and solar PV tries to capture the freely available but varying amount of wind and solar irradiance. As the share of electricity produced from variable renewable resources grows, so does the need to integrate these resources in a cost-effective manner, i.e., to ensure that total electricity production from all sources including variable renewable generation equals electricity demand in real time. Also, a future electric system characterized by a rising share of renewable energy will likely require concurrent changes to the existing transmission and distribution (T&D) infrastructure. While this report does not delve into that topic, utilities, grid operators and regulators must carefully plan for needed future investments in T&D, given the lead times and complexities involved.

Rather, this report focuses on the fact that variable renewable generation adds a different new component to the challenges facing system operators in maintaining system reliability. For example, the decline in solar production at the end of the day can lead to significant ramping needs for grid operators. Dispatchable non-solar resources (existing fossil and hydro generation but also potentially demand resources) must be rapidly deployed to make up for the decline in solar PV generation at the same time that residential electricity demand is rising at the end of the day. Similar challenges can arise as a consequence of deviations in output from wind or solar facilities relative to weather forecasts over time periods ranging from minutes to hours.

The question of integrating higher levels of variable renewable generation has recently been highlighted in the context of the U.S. Environmental Protection Agency's proposed Clean Power Plan. An Initial Reliability Review (IRR)1 of the Clean Power Plan conducted by the North American Electric Reliability Corporation (NERC) raised concerns about the levels of renewable energy generation incorporated into EPA's assumptions about what states could be expected to do to reduce greenhouse gas emissions. In an assessment of that IRR prepared for the Advanced Energy Economy Institute (AEEI), we found that NERC's reliability concerns related to renewable energy integration were likely overstated, given the levels of renewable energy penetration already managed with no measurable compromise of reliability in some parts of the United States as well as in Europe.2 As a follow-up to that assessment, we have been asked by AEEI to provide an overview of what utilities and independent system operators (ISOs) with relatively high shares of variable renewable generation are doing to integrate those resources into their systems without compromising reliability.

A survey of integration efforts in the United States and abroad reveals that the last decade has seen both a rapid increase in the deployment of variable renewable generation and improvements in their integration.3 ISOs and utilities have at their disposal a large and increasing portfolio of options to accommodate large and growing shares of renewable generation while maintaining high levels of reliability. The options range from purely operational changes to possibilities that become available as a consequence of advancements in technology unrelated to renewable energy. Examples of the former include enhancing the coordination between balancing areas (including increasing their size), reinforcing the transmission system, and increasing participation of demand response. Examples of the latter include technological advances in weather forecasting, which, together with better data on historical performance of renewable energy, allows significantly improved forecasting accuracy of renewable generation; the proliferation of smarter infrastructure, much of it deployed at the customer site (smart meters, smart thermostats, smart appliances, all enabled by smarter software), enabling participation of increasing amounts of demand in activities that help mitigate the variability of renewable generation; and technological advances of renewable and complementary technologies (inverters, batteries) that allow renewable generators themselves to contribute to maintaining reliability.

In this report, we provide two in-depth case studies, of the Electric Reliability Council of Texas (ERCOT) and Xcel Energy Colorado (a.k.a. Public Service Company of Colorado, or PSCo), to show how they integrate high shares of variable renewable energy. ERCOT (and the distribution utilities in ERCOT) and Xcel Energy Colorado have managed to successfully integrate increasing amounts of variable renewable energy resources at costs that have generally been small to modest.4 For example, ERCOT estimated the cost of integrating its first 10,000 MW of wind, approximately the capacity currently deployed, to be about $0.50 per MWh of wind generation.5 These organizations have used well-established and widely available methods and technologies such as:

  • changes in ancillary services, which manage short-term mismatches between electric supply and demand, with fast-ramping gas-fired generation, demand response, storage, and other technologies,
  • improved forecasting of production from wind,
  • increased flexibility of fossil power plants on the system,
  • evolving capabilities of renewable generation itself to contribute to reliability,
  • expansion of transmission infrastructure (even though not an "integration measure" according to our use of the term), and
  • newer approaches under development, which include utilizing large-scale storage, dynamically managing the capacity of transmission lines, and allowing demand response to play a bigger role in managing system variability (and emergency situations).

The success to date of ERCOT and Xcel Energy Colorado shows that integrating variable renewable energy at penetration levels of 10-20% on average and at times above 50% – i.e., high relative to the current levels in most of the United States – is possible. Integration challenges in other parts of the United States will differ due to both the mix of renewable resources and the make-up of the existing electric system. Nonetheless, by adopting approaches similar to those used (or planned) in ERCOT and Xcel Energy Colorado, ISOs/RTOs and utilities in other states should be able to integrate increasing shares of variable renewable generation using well-established tools and technologies. While infrastructure changes will likely be necessary in the longer term, the shorter-term integration challenges in many cases can be addressed with modest operational changes.

Ongoing technological progress and ongoing learning by utility and ISO/RTO managers about best practices of managing the operations of electric systems with high renewable shares will likely allow the integration not only of the levels of variable renewable energy capacity now in places like Texas and Colorado but even larger amounts in the future. Specifically, integration of variable renewable energy at levels of penetration as high as those reliably managed by ERCOT and Xcel Energy Colorado, if not higher, should not be seen as a significant technical obstacle to compliance with EPA's proposed Clean Power Plan. Rather, carefully examining the lessons learned in states and regions such as the ones examined here should help ISOs and utilities ensure that significantly larger amounts of variable renewable energy can be integrated at small to modest costs while maintaining high levels of reliability.

II. Introduction

A number of factors are contributing to increases in renewable energy production. They include declining costs of electricity produced from renewable energy sources, regulatory and policy obligations and incentives, and moves to reduce pollution from fossil fuel-based power generation, including greenhouse gas emissions. While not all renewable energy sources are variable, wind and solar PV currently dominate the growth of renewable electricity production and their production tries to capture the freely available but varying amount of wind and solar irradiance. As the share of electricity produced from variable renewable resources grows, so does the need to integrate these resources at the lowest possible cost. Also, a future electric system characterized by a rising share of renewable energy will likely require concurrent changes to the existing transmission and distribution (T&D) infrastructure. While this report does not delve into that topic, utilities, grid operators and regulators must carefully plan for needed future investments in T&D, given the lead times and complexities involved.

Recently, the question of integrating higher levels of variable renewable generation has come up in the context of the U.S. Environmental Protection Agency's proposed Clean Power Plan. An Initial Reliability Review (IRR) of the Clean Power Plan conducted by the North American Electric Reliability Corporation (NERC) raised concerns about the levels of renewable energy generation incorporated into EPA's assumptions about what states could be expected to do to reduce greenhouse gas emissions. In an assessment of that IRR prepared for the Advanced Energy Economy Institute (AEEI), we found that NERC's concerns about reliability were likely overstated, given the levels of renewable energy penetration already managed with no compromise of reliability in some parts of this country as well as in Europe.6 In that assessment, we noted a number of technological and operational tools system operators were using to maintain reliability while managing systems with significant amounts of variable renewable generation.

As a follow-up, AEEI has asked us to examine how system operators in the United States facing relatively high shares of variable renewable generation have adopted planning and operational practices to integrate renewable energy. They also asked to what extent technology, broadly speaking, has enabled larger contributions from renewable energy sources to the U.S. electricity supply without negatively impacting electric reliability. These technological impacts can be direct, by providing tools to help manage a more variable system (such as by deploying relatively small-scale storage), and indirect, by making possible changes in operational practices and market design also aimed at integrating renewables. Examples of the latter include advances in computing that improve forecasting, advances in inverter technology that allow more control over the output of non-synchronous generation (such as wind and solar PV) and hence their potential participation in redefined ancillary services markets, or advances in demand response and storage that enable the creation of entirely new ancillary services. We explored these issues by highlighting case studies of successful integration of relatively high levels of variable renewable generation, specifically focusing on renewable integration efforts in the Electric Reliability Council of Texas (ERCOT) and Xcel Energy Colorado.

ERCOT operates the smallest of the three independent interconnections in the United States and functions as the independent system operator (ISO) for nearly all of Texas. ERCOT is only weakly connected to surrounding electric systems, has very little hydro generation capacity and Texas has the highest installed wind capacity of any state with 12.5 GW installed. Xcel Energy Colorado operates a vertically integrated electric system with significant installed wind (and increasingly solar PV) capacity, but is not part of a regional transmission organization (RTO) or ISO. Wind meets close to 20% of Xcel Energy Colorado's load on average and wind generation at times exceeds 50% of its instantaneous demand.7 Both systems provide a preview of a potential future with a higher share of variable renewable generation in the United States. It is noteworthy that both systems have achieved the integration of higher renewable penetration using traditional and well-established processes, tools and technologies rather than relying heavily on new or emerging technologies.

In this report, we first summarize recent trends in renewable energy capacity and the knowledge of how to integrate renewable energy production. Then we discuss in detail integration measures planned or implemented in ERCOT and Xcel Energy Colorado. Finally, we highlight integration measures in other areas in a more summary fashion and provide some concluding remarks.

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Footnotes

1. NERC, Potential Reliability Impacts of EPA's Proposed Clean Power Plan, Initial Reliability Review, November 2014.

2. Jurgen Weiss, Bruce Tsuchida, Michael Hagerty and Will Gorman, EPA's Clean Power Plan and Reliability: Assessing NERC's Initial Reliability Review, The Brattle Group, February 2015.

3. For a recent survey of wind integration costs, see AWEA, Wind energy helps build a more reliable and balanced electricity portfolio.

4. Throughout this report, integration costs do not include the costs of building new transmission, whether for the explicit purpose of connecting more renewable resources or for broader reasons.

5. Milligan et al., Review and Status of Wind Integration and Transmission in the United States: Key Issues and Lessons Learned, NREL, March 2015, p.25. The cost estimate is based on an assessment of incremental spinning and non-spinning reserves required to manage both variability and uncertainty of wind production.

6. Jurgen Weiss, Bruce Tsuchida, Michael Hagerty and Will Gorman, EPA's Clean Power Plan and Reliability: Assessing NERC's Initial Reliability Review, The Brattle Group, February 2015.

7. In May 24, 2013, wind provided electricity equivalent to 60.5% of Colorado's total demand, eclipsing an earlier record of 56.7%. See http://www.aweablog.org/xcel-colorado-sets-u-s-record-with-over-60-wind/.

Acknowledgement: We acknowledge the valuable contributions of Judy Chang, Marc Chupka, Sam Newell, Frank Graves and other members of The Brattle Group for peer review.

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