LONDON, May 21 (Reuters) - Grid operators in the western United States are joining forces to design a new computer-run system to balance power across a wider combined area, improve handling of increasing amounts of fluctuating renewable power and save money at the same time.
They could achieve even greater benefits by going a step further, following the lead of their counterparts in Europe, by linking wholesale markets.
In the United States, operators called balancing area authorities (BAAs) control electricity transmission, with each responsible for keeping supply and demand in sync at all times within its defined area.
The Western Interconnection region, which includes 14 western U.S. states, two Canadian provinces and portions of one Mexican state, contains 38 such BAAs, linked by interconnectors.
The BAAs make decisions to dispatch power, both within and between their areas, typically once every hour. Any mismatch in the meantime is covered by firing up power plants, such as so-called peaking gas plants, within the balancing area.
The new approach, called an Energy Imbalance Market (EIM), is based on closer links between BAAs and between grid operators. It is part of a trend towards integrating wind and solar power into grids that were mainly designed to handle steadier sources of supply.
Under a U.S. EIM, a computer algorithm would establish whether or not there is an energy imbalance between grids and issue orders in five-minute intervals to power generators across multiple BAAs to dispatch power as needed at least cost.
The system is voluntary. Power generators can dip in and out, offering electricity for sale on the EIM or not.
Grid operators gain access to a wider geographical spread of generation resources and so avoid having to build more reserve capacity. The more frequent dispatch decisions also increase predictability and can help utilities avoid having to call up more expensive, fast-starting power plants.
A recent report by the National Renewable Energy Laboratory (NREL) calculated that the annual cost savings from more frequent, faster dispatch decisions would amount to $1.3 billion in the Western Interconnection region. (“Examination of Potential Benefits of an Energy Imbalance Market in the Western Interconnection,” NREL, March 2013)
In addition, the region would save another $146 million a year from the sharing of resources across a wider area, the NREL estimated.
Balancing across a wider area is useful to smooth out the variability of renewable power.
For example, a local effect such as a cloud can cause a big change in the amount of power generated by one solar farm, but that variability can be reduced by tapping a number of solar farms over a wider area.
Two Californian balancing authorities, PacifiCorp and CAISO (the biggest BAAs in the state), announced a memorandum of understanding in February 2013 committing to work jointly toward creating an EIM by October 2014, in a sign of early commitment to proceed with the wider market.
The European Union approach, called market coupling, creates links between wholesale power markets which often correspond to EU members’ national borders.
It also uses a computer algorithm to match interconnector capacity with energy demand data, as supplied by grid operators.
The difference with the U.S. EIM approach is that the resulting electricity flows are marketed to traders on wholesale power market exchanges, for them to buy and sell in various futures contracts.
Under an EIM, the electricity flows are not made available on wholesale power markets to traders; they remain confined in bilateral deals between generators and energy consumers.
The purpose of an EIM is to ensure that unfulfilled demand is matched better with available supply at the lowest price.
The European market coupling system in addition ensures that power flows from cheaper to more expensive markets to achieve the aim of price convergence.
This approach may not yet be possible in the United States, however, because each major region includes a mix of regulated markets and fully competitive, wholesale markets.
The EU example raises the question whether the U.S. drive to integrate more renewable power should also aim to speed up the rollout of competitive wholesale markets and achieve even greater social benefits by driving down the prices of relatively expensive areas.
editing by Jane Baird