Demand for affordable, reliable, domestically sourced, and low-carbon electricity is on the rise. This growing demand is driven in part by evolving public policy priorities, especially reducing the health and environmental impacts of electricity service and expanding energy access to underserved customers. Consequently, variable renewable energy resources comprise an increasing share of electricity generation globally. At the same time, new opportunities for addressing the variability of renewables are being strengthened through advances in smart grids, communications, and technologies that enable dispatchable demand response and distributed generation to extend to the mass market. A key challenge of merging these opportunities is market design-determining how to create incentives and compensate providers justly for attributes and performance that ensure a reliable and secure gridin a context that fully realizes the potential of a broad array of sources of flexibility in both the wholesale power and retail markets.This report reviews the suite of wholesale power market designs in use and under consideration to ensure adequacy, security, and flexibility in a landscape of significant variable renewable energy. It also examines considerations needed to ensure that wholesale market designs are inclusive of emerging technologies, such as demand response, distributed generation, and distributed storage. The report concludes with a review of potential areas for future research on wholesale power markets.
In the United States and elsewhere, renewable energy (RE) generation supplies an increasingly large percentage of annual demand, including nine U.S. states where wind comprised over 10% of in-state generation in 2013. This white paper summarizes the challenges to integrating increasing amounts of variable RE, identifies emerging practices in power system planning and operation that can facilitate grid integration, and proposes a unifying concept-economic carrying capacity-that can provide a framework for evaluating actions to accommodate higher penetrations of RE.There is growing recognition that while technical challenges to variable RE integration are real, they can generally be addressed via a variety of solutions that vary in implementation cost. As a result, limits to RE penetration are primarily economic, driven by factors that include transmission and the flexibility of the power grid to balance supply and demand. This limit can be expressed as economic carrying capacity, or the point at which variable RE is no longer economically competitive or desirable to the system or society.Power systems already have some degree of operational flexibility, an ability to respond to change in demand and supply, as they must accommodate variable and uncertain load. Power system operators have thus been able to accommodate increased variable RE largely without substantial new investment in system flexibility, such as new storage, demand response, or generation dedicated to addressing RE variability and uncertainty. To achieve higher penetration levels, multiple grid integration studies in the United States have evaluated scenarios where an economic carrying capacity of at least 30% is achieved via transmission expansion and largely understood changes to system operations. Studies have also demonstrated that carrying capacity is not fixed and can be improved through technical and institutional changes. This creates the possibility to achieve even higher penetration levels through strategic investments in both demand-and supply-side sources of flexibility.
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