In the transitioning power system, barriers are falling between renewables and traditional fossil and nuclear generation and between types of variable generation like wind and solar.
The energy infrastructure proposals from the Biden administration, if approved by Congress, are likely to accelerate the growth of utility-scale wind, solar and storage detailed by a December 2020 data compilation from Department of Energy (DOE) researchers. As variable renewables reach even higher penetrations and reliance on less cost-competitive natural gas fades, new solutions already in the works will assure reliability, power system analysts said.
Combined, utility-scale wind and utility-scale solar were "58% of all new U.S. generation capacity over the past six years," said Research Scientist Mark Bolinger of DOE’s Lawrence Berkeley National Laboratory (LBNL). LBNL's presentation of where the two resources have reached or can reach higher penetrations shows regulators and utilities how to plan "more-realistic portfolios" for their regions to meet Biden administration goals, Bolinger said.
The LBNL data reflects a transition "to an era where we need to assemble portfolios of resources into tradable energy products" that can be dispatched as predictably as traditional generation, Energy Innovation Senior Fellow Eric Gimon said. "There may not be one perfect way to bring this portfolio concept into markets, but we need to learn how to do it" to make clean energy viable and reliable in the energy marketplace.
Regulators, system operators, utilities and the private sector are starting to develop ways to reliably integrate the rising penetrations of variable renewables with flexible distributed energy resources (DER) to increase reliability, Bolinger and Gimon agreed. But the smart 21st century transmission and distribution (T&D) system and policy strategies the new power system will need to optimize this resource transformation are still in the works, stakeholders said.
Proof in numbers
There is a growing recognition of the falling costs of renewables and storage shown in the LBNL data that favor the transition to a new power system.
The Biden administration’s focus on climate is likely to drive even more clean power integration because renewables are winning the market, according to a July 2020 report from the American Council on Renewable Energy (ACORE).
"President Biden has talked about transformation in a way we have not heard from presidents before," ACORE President and CEO Gregory Wetstone said. For that, "power system infrastructure must change because renewables and emissions-reduction mandates are increasing, renewables and storage technologies are becoming more cost-competitive, and business and residential customer demand are accelerating that need."
The cost-competitiveness of utility-scale solar-plus-storage projects shown in LBNL's data was confirmed by a November 2020 BlooombergNEF report. Solar-plus-storage projects are now "a viable, dispatchable clean energy resource for utilities," BloombergNEF said.
The LBNL data shows a clear economic viability for clean power resources that represents "an existential threat to new natural gas generation in the near term because of the growth of wind and solar," added Mark Dyson, a principal with the Carbon-Free Electricity Practice at the Rocky Mountain Institute (RMI).
The December data on solar, wind and renewables-plus-storage projects goes beyond deployment growth to changes in cost and value, LBNL’s Bolinger said. It details capital costs, capacity factors, contract prices, levelized costs and market values.
There were 106 GW of installed U.S. wind capacity by 2020, up from 11.5 GW in 2006, and there were 29 GWac of installed utility-scale photovoltaic (PV) solar, up from 1.7 GW in 2012, LBNL reported. Solar is now competitive with wind, and "most developers are now active in both markets," Bolinger added.
"Since 2010, average installed costs in dollars per watt have fallen about 40% for wind and roughly 70% for PV," Bolinger said. As a result, PV has "rocketed to the top of grid interconnection queues" and 28% of queued PV at the end of 2019 "was paired with a battery," LBNL reported.
Most of the wind deployment is in the interior where the resource is strongest, he said. "Solar started in the desert Southwest but is spreading to other parts of the country, and with falling costs and increased pairing with storage, solar is expected to pass wind by 2023."
LBNL’s overview, detailed by state and regional markets on U.S. maps, allows more perspective on how the combined wind-solar-storage growth can be effectively integrated into the nation's resource mix, Bolinger said. In the 37-page slide presentation, policymakers can consider proposed policies’ potential impacts, regulators can better assess utility cost recovery needs, and utilities can see where new T&D infrastructure and DER’s flexibility will be needed as more utility-scale renewables and storage come online, he said.
This transition to a new power system is also having a clear impact on how utilities and others are thinking about the need for 21st century T&D infrastructure, stakeholders said.
The new grid
The demands of rapidly expanding clean power on "antiquated and inadequate" power system infrastructure have resulted in "big interconnection queues" that must be addressed, ACORE’s Wetstone said. There is increasing recognition that "transmission is a critically needed element to solving the climate problem."
The 734 GW of proposed projects in U.S. interconnection queues at the end of 2019 "is not a solar or wind issue, it’s a renewables issue" because 90% of it was new wind, solar and storage, according to a January 2021 report from ACORE affiliate Macro Grid Initiative.
New T&D infrastructure can reduce those queues by increasing the system's capacity while protecting reliability, the paper reported. And advanced technologies can add new grid efficiencies and operational flexibility to manage the greater capacity.
This need for new T&D infrastructure to integrate resource portfolios made up of more variable and distributed renewables is demonstrated in Brattle Group’s January 19 New York Power Grid Study.
New York’s Climate Leadership and Community Protection Act requires 70% renewables by 2030, zero-emission electricity by 2040, and an 85% economy-wide emissions reduction by 2050. That must include 6 GW of distributed solar, 3 GW of storage and 9 GW of offshore wind by 2035, with more of each in 2040 and 2050.
That growth will require upgrading the state’s T&D infrastructure at a cost of $6.8 billion or more, Brattle found. But "potentially high annual congestion costs by 2040 are projected to make these bulk transmission projects economical," it added.
New system capabilities are also being developed to integrate flexible DER that will help balance the growing penetration of utility-scale variable renewables, according to utilities and regulators.
The operational transition required by exploding DER growth makes integrating it in a way that protects and supports the power system critical, according to a white paper from Southern California Edison (SCE). The direct impact of the growing "frequency and magnitude of climate-driven disruptions" along with customer adoption of DER will require that "grid planning, design and operations" evolve, the paper said.
SCE’s Reimagining the Grid is a guide to the "evolving needs" caused by those factors, SCE Vice President of Asset Management, Strategy & Engineering Paul J. Grigaux said. "We want to have the system technologies to see and manage their impacts."
California regulators and other stakeholders are in growing agreement about "a new future evolving very quickly," Grigaux said. It will require managing challenges to "safety, grid stability, asset condition, reliability and resilience," SCE wrote.
The impacts of clean power portfolios on T&D infrastructure demonstrated by New York and foreseen by SCE will be magnified by new orders from the Federal Energy Regulatory Commission, DER advocates said. Order 2222 and rulings clarifying it require system operators to provide new tariffs and rules for bringing even more aggregated DER into wholesale markets.
While some in the power industry see these changes as a threat, DER advocates said they can offer power system operators an opportunity to add the flexibility the new system will need as a result of the growth of variable renewables.
The new flexibility
The high penetrations of variable renewables shown in the LBNL presentation reflect a fundamental shift in policy and market factors and in customer demand, stakeholders said. DER growth, initially driven by policies like renewable portfolio standards, tax credits, rebates and tariffs, is now being demanded by policymakers and utility customers.
With new T&D technologies, that DER can provide the flexibility utilities need to balance the variability of utility-scale renewables, regulators, utilities and researchers told an October 20 Brattle Group-hosted symposium.
"Load flexibility can shift energy use to when it costs less, shape energy use to match renewables' availability, and allow them to meet other system needs," said Commissioner Matt Schuerger of the Minnesota Public Utilities Commission during the symposium. "And it can be a cost-effective solution for reliability by offsetting other investments in generation with lower-cost customer-owned distributed technologies."
The most cost-effective way to meet a national clean energy standard similar to the one just proposed by the Biden administration is a power mix that minimizes fossil fuels and optimizes between utility-scale and distributed renewables and energy storage, a December 2020 Vibrant Clean Energy study found.
That resource mix can "reshape" demand by enabling load flexibility, and can use customer-owned DER to reduce spending on new utility-scale generation and T&D infrastructure, Vibrant added.
Incorporating DER into utilities’ integrated resource planning "is the complex analysis utilities are now beginning to do," said Smart Electric Power Alliance Director of Research and Industry Strategy Brenda Chew. It will "prepare them to build and enable greater capabilities that can be obtained from a portfolio of clean power resources."
But system operators and utilities are only just beginning to understand how to do that, Energy Innovation’s Gimon said.
Putting it together
Turning portfolios of clean power resources into "liquid tradable long-term energy commodities" would further the resource portfolio transformation, but remains a challenge, Gimon said.
These dispatchable and reliable commodities would be made up of combinations of the unique variable and distributed clean energy elements in any power provider's resource mix, he added.
It is complicated for vertically integrated utilities because it requires understanding the generation profiles and the market drivers for every renewable resource on the system owned by customers, utilities and developers, he said. And it requires assimilating an enormous range of system variables like weather, inverter size, tracking, software and when to charge and discharge batteries.
Many project owners, utilities and market operators are still developing the planning expertise to assimilate these factors into a structured contract at the bulk system level, he said. Planning to optimize a clean power portfolio at the distribution system level is "a whole new challenge."
Adapting such portfolios to organized markets may be easier, Gimon said. Bids into long term futures markets to meet energy, capacity or other service offerings can be adjusted or hedged according to variable conditions in the day-ahead and real-time markets. And customer-owned resources can participate through retailers and aggregators at the distribution level, he added.
Vertically integrated utilities can "control and optimize the whole value stack" of the clean power portfolio, but "regulators may be uncertain of whether the utility assessed and valued it properly," he said. And the utility may have regulatory incentives to optimize for "objectives other than the customer’s interest."
As clean power technologies combine into marketable products, there are three guiding principles, Gimon said. The products should derive from markets, participation should be voluntary, and the products should be "liquid and transparent" to maximize their cost-effectiveness and the market’s efficiency.
The clean power commodity is not a market reality yet, Gimon acknowledged. But it could be the end product of today's ongoing process of using flexible DER to integrate the expanding amounts of variable renewables shown by the LBNL work and it is likely to become more important across the country under Biden administration policies.
Eventually, he added, "utilities and market participants will learn how to optimize their clean power portfolios to manage financial risk in this new context, as they do now with more traditional resources."