Electricity Markets

Report details impact of higher renewables on wholesale markets

Patterns in electric wholesale markets are expected to change as renewable energy reaches the 40 percent level, with electricity prices dropping, volatility increasing and peak periods occurring later in the day, with major implications for utility planners, according to a report released May 16 by the Lawrence Berkeley National Laboratory.

“The most fundamental changes relate to the timing of when electricity is cheap or expensive and the degree of regularity in those patterns,” said the report, Impacts of High Variable Renewable Energy Futures on Wholesale Electricity Prices, and on Electric-Sector Decision Making.

Utilities and others should consider the potential shift in patterns as they plan investments in infrastructure and programs, the report said. The changes, for example, have implications for power plant choices, energy efficiency portfolios and rate designs, the LBNL researchers said.

In their study, the LBNL researchers looked at three scenarios — 30 percent wind with at least 10 percent solar, 20 percent wind and 20 percent solar, and 30 percent solar with at least 10 percent wind — in the Southwest Power Pool, California ISO, New York ISO and the Electric Reliability Council of Texas.

By 2030, the renewable additions lower wholesale power prices by 15 percent to 39 percent, depending on the scenario and region, according to the report.

Also, the number of hours with prices below $5 per megawatt-hour increase by 2 percent to 19 percent. “This offers an important opportunity for measures that can make use of cheap electricity such as deferrable loads like electric water heaters, charging of stand-alone or transportation-related storage devices, load-shifting, or intermittently-run advanced forms of commodity production,” the report said.

Wholesale prices will likely become more volatile as variable renewable generation increases, according to the report. “Stronger price variability and irregularity will favor flexible resources that can start and stop frequently and on short notice, including storage,” the report said.

Price volatility may also make typical time-of-use rate designs less effective and may favor more flexible designs like the residential “real-time pricing” offers, according to the report.

The LBNL researchers expect average ancillary service prices to jump by $15/MWh to $38/MWh with higher renewable penetration. These higher prices suggest increased opportunities for various resource types to provide ancillary services including variable renewable energy, storage or faster ramping products, the report said.

SPP, New York and Texas would see their net peak loads shift into the early evening from the mid- to late-afternoon at 40 percent wind and solar levels, according to the report. California’s net peak would remain unchanged at 7 p.m.

SPP, New York and Texas would also see firm capacity reductions of 4 percent to 16 percent under the three scenarios, according to the report. Renewable energy would drive capacity retirements including coal-fired, natural gas-fired and oil-fired units. California could see a jump in firm capacity by up to 4 percent.

“Across most regions and scenarios, we see a modest increase in gas combustion turbine capacity that partially offsets the oil, coal and gas steam turbine retirements,” the report said.

No strong patterns emerge across the four regions in how wind and solar additions affect capacity prices, defined as prices that allow generators to recover their ongoing fixed and variable operating and maintenance costs and the annualized capital costs of new combined cycles and combustion turbine units beyond the revenue earned in the energy and ancillary service markets, the report said.

Utility planning may need to change because of increased renewables. For example, reciprocating engines may be more appealing than combined-cycle power plants because wind and solar require increased flexibility while the provision of ancillary services will be more important, the researchers said.

Higher amounts of solar on the system may make it more appealing for utilities to concentrate electric vehicle charging stations at work sites instead of residences so cars can be charged when the sun is shining, according to the report.