New study suggests PJM could benefit from increasing its renewable resources

Map of PJM service areaA new study has found that the PJM Interconnection LLC system could not only handle a dramatic increase in generation from wind and solar with sufficient reserves and a transmission build-out, but would also glean a number of benefits from having a greener grid.

However, a report on the study’s findings notes that increased penetration of solar and wind generation could reduce net revenues for conventional generation resources, and it recommended that PJM study the matter further.

Even at 30% penetration of wind and solar generation by 2026, the PJM system should be able to handle the additional renewable integration with sufficient regulation reserves of up to an additional 1,500 MW and a transmission build-out of up to $13.7 billion in costs, according to the report. To put that in context, the PJM board in December 2013 approved $4.6 billion in transmission projects.

The PJM study comes as a number of U.S. regions are grappling with how to ensure grid reliability as variable energy resources continue to connect to the grid, including at the residential level, and power plants announce they will retire in the face of environmental requirements and challenges competing with other resources in the PJM forward capacity market.

Past reports have also suggested that PJM would benefit from increased penetration of renewable resources. A study performed by Synapse Energy Economics and released by Americans for a Clean Energy Grid in May 2013 found that even if more than double the amount of currently expected wind power is installed, the costs of integrating those projects in the region would be “more than” offset by production efficiency gains.

Regarding the recent PJM study, the Regional Transmission Organization (RTO) “has long held that ISOs and RTOs are better able to integrate variable energy resources because of their organized markets and regional infrastructure planning processes,” according to a March 3 summary of the report’s findings. The study also found that PJM’s large geographic footprint “provides significant benefit for integrating wind and solar generation because it greatly reduces the magnitude of variability-related challenges,” the summary says.

Some of the major impacts of more renewable energy on the PJM grid include lower use of coal and combined-cycle gas turbine generation, lower emissions of criteria pollutants and greenhouse gases, minimal renewable energy curtailment, reduced system wide production costs, and lower average locational marginal prices, or LMPs, and zonal prices.

However, the lower LMPs, when combined with the reduced capacity factors, resulted in lower gross and net revenues for the conventional generation resources, the report says. The report continues to say that, “the renewable generation increased the amount of cycling (start up, shut down and ramping) on the existing fleet of generators, which will result in increased [variable operation and maintenance] costs on these units.” However, the report concluded those increased costs were relatively small compared to the value of the fuel displacement, it said.

Although the values varied based on total penetration and the type of renewable generation added, on average, 36% of the delivered renewable energy displaced PJM coal-fired generation, 39% displaced PJM gas-fired generation, and the rest displaced PJM imports or increased exports, the report says.

Additional regulation services would be needed to compensate for the increase in generation from renewable resources. The 30% scenarios, which added more than 100,000 MW of renewable capacity, required an annual average of only 1,000 MW to 1,500 MW of additional regulation, compared to the roughly 1,200 MW of regulation modeled for load alone, the report says. No additional spinning reserves were required.

Looking ahead to 2026, the Feb. 28 report covered a range of scenarios, including a business-as-usual reference scenario using existing levels of wind and solar generation in 2011, the year PJM initiated the study. This scenario served as the benchmark to see how PJM operations could change with increased renewables.

Another scenario assumed that wind and solar generation will meet existing state renewable portfolio mandates with 14% renewable energy penetration in PJM. The other scenarios were for 20% and 30% penetration with different levels of solar generation and various combinations of onshore and offshore wind projects.

Some of the higher penetration scenarios showed new patterns of usage could happen. “High penetrations of solar generation significantly reduced the net loads during the day and resulted in economic operation which required the peaking turbines to run for a few hours prior to sun up and after sunset rather than committing larger intermediate and base load generation to run throughout the day,” the report says.

Recommendations

The report recommends that PJM develop a method to determine reserve requirements based on forecast levels of wind and solar production. Additionally, PJM should consider intraday unit commitments using a midrange forecast in real-time operations to update the commitment of intermediate units, such as combined-cycle units, that could start in a few hours.

PJM should explore the reasons for ramping constraints on specific units, determine whether the limitations are technical, contractual, or otherwise, and investigate possible methods for improving resource flexibility, the report says.

PJM should investigate the potential consequences of increased amounts of renewables reducing energy revenues for conventional power plants. “The study results show that as renewable penetration increases, energy market revenues for conventional generation resources will decline significantly,” the report says. “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.”

The impact of renewables on production cost savings was investigated, but the analysis did not include possible secondary impacts to the capacity market such as increased retirements due to noneconomic performance, or a possible need for generators to recover more in the capacity market because of reduced revenue in the energy market.

The RTO should also investigate possible options for increasing the flexibility of power plants with limited ramping or cycling capabilities that have been traditionally operated as base load units, the study said.

Another potential source of system flexibility is from wind and solar generation, the study said. “In the past decade, manufacturers have made significant advancements in control methods that can make plant power output responsive to grid-level controls, including frequency response and down-regulation. It would be prudent for PJM to investigate how wind and solar plants could contribute to frequency response and work toward interconnection requirements that ensure PJM will continue to meet its grid-level performance targets,” it said.

The executive report on the study was prepared for PJM by General Electric International Inc. acting through its consulting group, GE Energy Consulting. Five other companies also helped perform the study: AWS Truepower Inc., EnerNex, Exeter Associates Inc., Intertek Group plc’s Asset Integrity Management Services, and PowerGEM LLC.

This article was taken from SNL Financial.

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