I was impressed by the IEEE PES Grid Modernization Conference; but I only made it to a few sessions. I volunteered there and met some nice, smart people. Here are some scattered notes:
The utility business models panel was fascinating. Some really interesting thinkers there. Richard O’Neill from FERC speaking about capacity markets said that they are not needed in a fully price responsive system.
William Hogan, From the Harvard Kennedy School, spoke on electric market design and the green agenda. He stressed the importance of understanding both regulatory economics and power electronics. Open access and non-discrimination is most important. New designs are set up for day-ahead planning; but the only thing that matters is real time. There is a step function in the supply curve. There is a need to formalize pricing.
The Clean Power Plan (CPP):
There are rate based and mass based approaches with trading across like plan. According to a lawyer he cited, the CPP is “a mess.”
Carbon tax is simplest
Next, cap and trade
Cumulative constrained dispatched
Deemed cost adders
Capacity market tranches
The mistakes of the past carry through today. The price of energy as the price of the most expensive plant is not right. Need the scarcity component. The Texas way is best. He is critical of the NY Public Service Commission and REV (Reforming the Energy Vision).
He was critical of subsidies for rooftop solar; he doesn’t like paying for his neighbor’s solar panels.
Schmuel Oren discussed renewable power and demand response and the possibility of and end to end aggregator business model. Treating energy as a commodity might be okay at the wholesale level; but maybe it is better to consider energy as a service (See also Peter Fox-Penner’s Smart Power on this debate). This is part of a long-standing debate between price and quality. Oren indicated that there has been not demand response (DR) success yet. With the potential for 5 minute prices you could have priority service and contracts with customers — people are used to options on contracts, like travel options — in insurance, telecom, phones, etc. A business model, or paradigm, is needed. Coloring power and tagging your devices could be too intrusive; the alternative is to go to the meter.
He said that many energy policy discussions require first considering a Spherical cow of uniform density. For example, you might need to eliminate feed-in tariffs or firm up renewable capacity payments. Don’t dictate to consumers which appliance they can use. There might be a stochastic optimization model for each household. Supply functions must be considers with efficiency losses. He sees a democratization of the grid (but Hogan countered that is is not democratization; but rent-seeking behavior — as with the rooftop solar subsidies he dislikes). (Oren: Spoke of democracy but said it is less efficiency that a benevolent dictatorship.) Oren: Load balance would occur at the local level. Consider the shoe cost function and the Sheppard theory of price. What will the role and value of flexibility be in the future of low carbon energy system?
Goran Strbac indicated that utilization is dropping — in 2015, in the UK it is 55%; by 2030 it will be less than 25%. This is wasteful. He noted that winter usage is greater than summer usage in the UK. Levelized costs are incomplete — e.g. for wind and solar need to quantify system integration costs. Want to lower carbon. Align investment with society. Need to move from redundancy in assets to intelligence, with security of supply. Heat systems storing water are cheaper than storing electricity.
Northern Europe is windy; Southern Europe is sunny. But the UK built the most solar recently. The cost of solar in Italy is 50%. You get 3x the wind turbine energy in Scotland versus the south. Country independence is a problem (makes one think Brexit — though he never specifically mentioned it and one questioner jokingly asked him if he had hear of Brexit).
[Is global socialism then the answer?]
We can save something like 3 billion (?) Euros per year with coordination. Market design: make capacity market in EU global. UK has France and the Netherlands in its capacity market. Consider New England costs versus old England costs. The only thing certain is uncertainty.
Hugh Rudnick discussed business models for hydrothermal power systems, focused on Chile with 17 million people and 15K GDP. Hydro is big; but there is wind, geothermal, and biomass potential, which could be helpful given uncertainty with hydro. The distribution companies have regulated power purchase agreements (PPAs) in public auctions. Need a diversified portfolio.
Q and A: Odd Notes and Interesting Points
PJM: “PJM Interconnection is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.”
Someone noted that there are 14 governors involved. So you need to keep your “finger off the trigger.” Investors see risk. Many too many in distribution network. (?)
We have never had good capacity market. In the spot market there is no guarantee of a good rate of return. A market is needed. Investment is needed. Need to consider political realities.
But someone noted that the ERCOT retail market and PJM are getting investment.
Someone noted that the Texas retail model with aggregators is good. Europe lacks a transparent spot market so you can’t see a year ahead.
One person noted that industrial customers are smart; but that retail customers don’t know what they want to do.
Hugh Rudnick said there is a challenge on pricing between a cost-based and market based approach due the pricing of storage. Building pump storage — how to price that?
Hogan said that distributed energy is complicated. Externalities need to be internalized. Selected papers on this are available on his website. He noted the issue of small particulates, which also need to be addressed in addition to CO2.
Genscape is doing some interesting work to non-intrusively gather information from transmission lines, which will be helpful for Independent System Operators (ISOs).
This was an interesting session discussion new communications technologies, solid state transformers, and drones impacting the grid. I hadn’t thought about drones and the grid; but that seems to have some interesting potential.