POWER MARKETS:

Largest U.S. grid operator could switch to 30% renewables with no ill effects -- study

With adequate investment in expanded transmission capacity, states in the PJM Interconnection could get up to 30 percent of their electricity from renewable resources -- primarily large-scale wind and solar -- in 2026 without a detrimental effect on grid reliability, a study led by GE Energy Consulting concluded.

The good news for consumers is that under every scenario envisioned in the study commissioned by PJM, fuel costs in the regional transmission organization (RTO) would be lower, variable operation and maintenance costs would decline, and the market prices of energy and transmission on average would be lower than they are now. Emissions of pollutants and greenhouses gases would also fall, the study said.

What needs to be studied further is how to mitigate the impact of reduced energy revenues on conventional generation resources such as coal, natural gas, nuclear and hydroelectric as more electricity comes from renewable sources.

"The study results show that as renewable penetration increases, energy market revenues for conventional generation resources will decline significantly. To remain economically viable, these plants would either need to receive a larger share of their revenues from a capacity market or perhaps increase energy prices to help cover fixed costs," a cover letter accompanying the final report said.

PJM is the nation's oldest RTO, formed in 1997 to coordinate the movement of wholesale electricity in all or parts of 13 states -- Pennsylvania, New Jersey, Maryland, Delaware, Virginia, West Virginia, Ohio, North Carolina, Kentucky, Indiana, Michigan, Illinois and Tennessee -- and the District of Columbia.

Right now, wind and solar power are a blip on the RTO's generation profile. In 2012, of the 790,090 gigawatt-hours of electric generation in PJM, 12,856 GWh, or less than 2 percent, came from wind or solar. But hundreds of renewable energy projects have been proposed in PJM and are awaiting review.

The study was commissioned by PJM in 2011 and was the subject of a Monday teleconference among PJM stakeholders.

"The study's main conclusion is that the PJM system, with adequate transmission expansion (up to $13.7 billion) and additional regulation reserves (up to an additional 1,500 MW), would not have any significant reliability issues operating with up to 30 percent of its energy (as distinct from capacity) provided by wind and solar generation," GE Energy said.

PJM has long held that RTOs "are better able to integrate variable energy resources because of their organized markets and regional infrastructure planning processes," the study said. But it also found that "PJM's large geographic footprint also provides significant benefit for integrating wind and solar generation because it greatly reduces the magnitude of variability-related challenges," the study said.

More flexible resources

Most states have either mandatory or voluntary targets for the use of renewable energy, with 20 percent being the most common target.

California in 2011 raised its 20 percent renewable energy mandate to 33 percent by 2020. The move was widely scoffed at for being too ambitious, especially in a state that has disavowed further reliance on nuclear or coal-fired generation.

So for a region as large as PJM not just to contemplate 30 percent renewable, but to conclude that "there are no insurmountable operating issues," has to be comforting for renewable advocates, especially when it pertains to a region more than 50 percent reliant on coal and natural gas for its electricity.

The study reinforces that a market can integrate wind power without a detrimental effect on reliability, said Michael Goggin, senior electricity industry analyst with the American Wind Energy Association. "We've already seen that in ERCOT [the Electric Reliability Council of Texas] and MISO [the Midcontinent Independent System Operator]," he said.

Ken Schuyler, PJM project manager for the study, said the RTO plans to have "more discussions with the stakeholders and see where they want to go."

One task will be to "look into reasons why resources are not more flexible -- try to determine if there are technical reasons or contractual reasons and look into possible methods for improving [generation resource] flexibility," Schuyler said. "PJM thinks that would provide value to the grid even if we don't have more renewables."

He cautioned though that "you have to keep in mind there were some things that weren't within the scope of the study" that could temper its conclusions. "We didn't look at the distribution system impacts; we didn't look at voltage constraints or voltage stability issues," he said. "We didn't look at changes to capacity markets -- such as, would capacity prices need to increase to keep the conventional generators online? So there's lots of caveats. Some people are reading the study and concluding that there are no issues. You have to look into it a little deeper."

Twitter: @RodKuckro | Email: rkuckro@eenews.net

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