MEETING THE RENEWABLE CHALLENGE
Published In: EnergyBiz Magazine September/October 2011
I HEAR A LOT OF TALK about a great desire to include renewable energy into the national energy mix, if it weren't for the issue of intermittency. Mother Nature decides when to make the wind blow or the sun shine. As the CEO of a renewable energy company with more than 500 megawatts of wind and solar installed in North America, I know we only build renewable energy projects in areas with the best wind or solar capabilities within a given market. Although intermittency has become the foremost excuse for utilities to restrict or block the addition of renewable energy resources, intermittency itself is not the immediate issue for utilities. Instead, utilities need to consolidate into more modern and broader markets that diversify management of the intermittency issue and ensure competitive access to the power grid.
The nation's power grid is actually a mesh of smaller grids owned and controlled by several large and small regulatory bodies. Some portions have been organized into markets controlled by relatively large independent market operators, but a patchwork quilt of many smaller utilities controls other portions. Each entity, large or small, is required to control its grid boundaries by matching its generation resources to consumer demand for electricity at all times, day or night. Consumption of electricity is also somewhat intermittent, changing minute by minute, influenced by random events and nature.
Think of intermittency as a big rock being thrown into a small pond if you are a small utility. That same intermittency becomes a little pebble being thrown into a big lake or even the ocean if you are a broad, independent market, leveraging the advantages of consolidated grid operating benefits.
For the sake of efficiency, some portions of our nation's mesh of power grids have consolidated and organized to span large geographic areas with centralized operating centers and highly integrated operating protocols. For them, intermittency is diversified and managed across a larger market with a broader set of tools. The wind might not blow in one corner of the region, but maybe the sun is shining in the other corner. Diversifying the region tends to reduce the effect of or cancel out intermittency, allowing a larger portion of power to come from renewables instead of coal, gas or oil.
Although this makes sense for integrating renewable energy, it makes even more sense for driving down the cost of electricity. In 1999, a dozen or so utilities operating grids formed the Midwest Independent System Operator and began consolidating key operating functions, leading to the launch of the Midwest ISO market in 2005. Midwest ISO's 2010 Value Proposition Report says it demonstrated adjusted total net benefits between $648 million and $874 million for members as a result of efficiencies obtained through consolidation. Interestingly, $34 million to $42 million of those savings are directly related to wind integration.
Other markets organized in the United States and other countries issue annual reports that demonstrate that consolidation results in greater day-to-day grid management efficiencies, reductions in overall seasonal and daily reserve requirements and greater grid growth management efficiencies, in turn resulting in annual savings of hundreds of millions, if not billions, of dollars.
It's time we revisited the value proposition for greater consolidation among grid operators as we discuss how to grow renewables within the context of a cleaner environment and energy independence. Federal power agencies are conducting studies to increase their individual utilization of renewables, but there isn't much talk of consolidating control into independent markets. Consolidation will help establish a modern foundation for a more diverse national energy portfolio. It has the potential to save hundreds of millions, if not billions, of dollars over a broad regional area, and it will more dramatically open up our grid to a cleaner energy future. Daniel J. Foley is the