Energy Biz - March/April 2008 - (Page 26) It’s a helping hand ADAPTING GRIDS TO RENEWABLE GENER ATION BY DAVID L APL ANTE AND ANJALI SHEFFRIN the grId Renewable energy resources provide electricity with little or no emissions, reduce dependence on fossil fuels and strengthen local economies. To encourage renewable resources, policymakers have implemented favorable tax policies at the federal and state level, and 25 states and the District of Columbia have implemented renewable portfolio standards that require utilities to obtain a targeted percentage of their energy from renewable resources. These renewable portfolio standards include many types of renewable resources, but generally exclude large hydro resources. The combination of renewable portfolio standards and tax policies has helped make renewable energy financially viable in many areas. According to a recent study released by the ISO/RTO Council, an industry organization consisting of representatives of North American independent system operators and regional transmission organizations, organized markets run by ISOs and RTOs are effective mechanisms to encourage the development of renewable resources. The North American ISOs and RTOs are responsible for delivering two-thirds of the electricity consumed in the United States and just over 40 percent in Canada. Renewable generation currently provides about 8.6 percent of the energy produced in regions operated by ISOs and RTOs, with 6.2 percent coming from large hydro, 1.2 percent from wind, and the remaining 1.3 percent supplied by geothermal, biomass, and solar. Yet nearly half – 44 percent – of the 300,000 megawatts of proposed new generation are renewable energy projects. Wind energy is the largest single technology in the ISO and RTO interconnection queues, exceeding natural gas, more than doubling coal, and tripling nuclear. Wind proposals represent 10 times the amount of wind generation currently installed. Proposed additions for solar, hydro, geothermal, and biomass are also impressive totaling nearly 17,000 megawatts. Solar in particular is making a strong showing in California. Several features of existing ISO and RTO wholesale electricity markets play a critical role in the development of renewable resources. For example, they represent a wholesale market that is open to investment by all parties. They offer price transparency, which allows developers to make intelligent decisions about whether to invest and what type of plants to build. The large size of the markets in which ISOs and RTOs operate reduces the cost of integrating wind into the power system and allows system operators to adjust quickly to maintain system reliability should wind plants suddenly become unavailable. The ISOs and RTOs include wind forecasting as part of their existing regional planning. They already coordinate regional transmission planning, which makes it possible to build the power lines needed to bring renewable energy to market. It is expected that renewable resources will be located far from load centers, so additional transmission lines will be required to interconnect the large increase in renewable genera- tion expected over the next several years. As a result, several ISOs and RTOs have developed important transmission planning initiatives especially designed to support renewable resources that will bring that renewable energy from those remote sites. For example, the Federal Energy Regulatory Commission has given early approval to a proposal by California ISO to develop new transmission in areas suitable for renewable generation, but far from the main grid. Costs would be allocated to California load-serving entities until the generation is operational. The Southwest Power Pool, which includes portions of Texas, Kansas, Oklahoma, and Arkansas, has proposed the “X Plan,” a $419 million transmission project that spans western Kansas, Nebraska, Oklahoma, and extends into the Texas panhandle. The project would enable the region to tap the tremendous potential for wind power. North American ISOs and RTOs include alberta Electric system Operator (aEsO) california independent system Operator corporation (caisO) Electricity reliability council of Texas (ErcOT) Ontario’s independent Electricity system Operator (iEsO) Midwest independent system Operator (MisO) isO new England (isO-nE) new Brunswick system Operator (nBsO) new york independent system Operator (nyisO) PJM interconnection (PJM) southwest Power Pool (sPP) Meanwhile, ERCOT has initiated a process to designate Competitive Renewable Energy Zones to facilitate the development of thousands of megawatts of new wind generation in Texas. And in 2006, ISO New England, state regulators and other stakeholders came together to conduct the New England Electricity Scenario Analysis Initiative. The objective was to arm the region with information to help make decisions about how to address the challenges of the need for new resources, a desire for lower prices, and stronger environmental mandates. In fact, ISOs and RTOs already possess much of the market data that states need to track compliance. PJM and ERCOT administer tracking systems for renewable portfolio standards implementation and compliance. PJM Environmental Information Systems, a subsidiary of PJM, administers the Generation Attribute Tracking System for PJM. ISO New England provides all of the operational data needed to run New England’s Generation Information System, and New York is in the process of designing and implementing a tracking system. The Midwest ISO provides the data for the Midwest Renewable Energy Tracking System. In addition, the Western Renewable Energy Generation Information System, encompassing 14 western states and two Canadian provinces, began operating in July 2007. The combination of federal and state policies, competitive wholesale markets and successful regional planning has resulted in significant progress toward developing renewable energy sources and meeting emerging environmental goals. A continuation of this effort on a North American scale will help keep the momentum going as the need for renewable resources continues. David LaPlante is ISO New England vice president of wholesale market strategy. Anjali Sheffrin is California Independent System Operator chief economist and director of market and product development. 26 E n E rgyB i z March/April 2008
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