Next-Generation Energy Technologies Are Constrained by Outdated Markets. Here’s How to Fix Them

greentechmediaMay 15, 2018802

Next-Generation Energy Technologies Are Constrained by Outdated Markets. Here’s How to Fix Them

After eight and a half years of the most rewarding experience of my professional life, the end of November will bring the close of my tenure at GTM and GTM Research.

I couldn’t be more proud of our team and our work, and I’m beyond excited to see what comes next. I’ll continue playing a part in GTM’s future -- I’ll remain a senior adviser to both GTM and Wood Mackenzie's Power & Renewables practice, and I'll keep co-hosting The Interchange podcast until someone pries the mic from my cold, dead hands.

In the meantime, I’m feeling nostalgic about how much the electricity market has changed since I joined GTM in early 2009. Operating solar capacity in the U.S., for instance, has grown by a factor of 37(!). And now renewables often rank as the cheapest source of new generation capacity.  

Yesterday’s prevailing wisdom -- that clean energy is too expensive for widespread adoption -- is now rarely expressed among energy market leaders. I certainly didn’t see that changing so quickly a decade ago.

But there is a long way still to go. Today’s prevailing wisdom still assumes this transformation will pose a threat to the grid’s stability. Even if these new resources are cleaner and cheaper, surely they will impose an array of new external costs to maintain reliability and resiliency, right?

To the degree that this risk is real, it is largely self-imposed, because the next generation of energy technologies remains structurally disadvantaged in today’s power markets. Renewables, energy storage and demand response (sometimes) get credit for their potential to reduce greenhouse gas emissions, but they could offer so much more. Rather than being liabilities in tomorrow’s power system, they could be assets. But first they need the opportunity to perform.

Think of these technologies as the benchwarmers who have been spending every free minute shooting three-pointers in their backyard. Put them in the game and they’ll prove themselves stars.

Solar power can improve grid reliability

Much ink has been spilled on the challenges that higher penetrations of solar can create (in the process, teaching an entire generation of energy analysts how to draw a duck). But relatively little attention is paid to the ways solar can help stabilize the grid. A combination of smart inverters and targeted plant operation can enable solar to offer a wide array of essential reliability services, from frequency control to voltage regulation.

First Solar, in partnership with the California Independent System Operator and the National Renewable Energy Lab, proved this point earlier this year by strategically operating a 300-megawatt solar farm to provide reliability services to the wholesale market.

The results are impressive; not only was the project able to deliver an array of reactive power controls, but in some cases, it was able to do so better than typical gas turbine technologies.

Did your eyes glaze over during that last section? Mine too, and I wrote it. But here is the point: First Solar demonstrated that a solar project can provide an essential reliability service better than any source of conventional generation.

But the emphasis here is on can, rather than does. The vast majority of solar projects offer no such services -- not because they’re technically incapable of doing so, but because the market doesn’t reward it. Most projects are compensated purely for energy delivered (in kilowatt-hours or megawatt-hours), not for their contribution to grid reliability. And providing reliability services comes at a cost: First Solar had to curtail about 10 percent of the project’s output to leave headroom for the signal response.

To date, the solar industry's incentive to develop advanced grid features has ben limited to either regulatory compliance or the prevention of feeder clogs and ramping issues that would hinder the installation of more solar. This has led technology providers to do everything possible to improve the cost structure of solar (and boy, have they succeeded), but relatively little to optimize the technology for grid reliability.

This is a solvable problem. Grid operators can introduce or increase incentives for reactive power, and utilities can adopt the clever model PPA developed by the Smart Electric Power Alliance to use curtailed solar as a grid resource. But first the markets need to recognize the value that solar can provide.

Microgrids can provide resilience

Electricity resilience is having quite a moment in the U.S. To the current administration in Washington, enhancing resilience appears to be the centerpiece of a strategy to keep baseload plants alive (and perhaps to end the "war on coal”). Meanwhile, outages in the wake of Hurricanes Harvey, Irma, Jose and Maria have tested the resilience of the grid in the Southeast U.S. and the Caribbean.

First, let me repeat a point that many others have made: resilience and reliability are different. Reliability is the ability of the grid to deliver electricity consistently when demanded. If the lights nearly always turn on when you flip the switch, you have reliability. Resilience is the ability of the grid to recover quickly and effectively from a major event (like, say, a hurricane). You can have a grid that is generally reliable but completely falls apart after a disaster, or one that is hardened to handle major incidents but experiences daily blackouts.

When a crisis incident occurs, a resilient grid offers two benefits: a smaller impact and a faster recovery. On the latter point, a variety of recent advancements have enabled faster recovery in the mainland U.S., as evidenced by the impressive recovery in Florida after Hurricane Irma.

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