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Reliability vs. Cost Tradeoffs in California Wind Energy Investments

Frank Wolak, Economics; Burton Richter, SLAC

This project quantified the added costs of serving California's electricity demand with an increasing share of intermittent renewable generation, such as wind and solar energy. Using four years of California ISO system operations data, as well as day-ahead and hourly market price data,  the researchers found that higher levels of daily wind output resulted in lower total daily fossil fuel burn. However, this relationship is considerably less than one-for-one.  A ten percent increase in daily renewable energy production resulted in only a 2.5 percent reduction in total daily fossil fuel use, primarily in natural gas. One possible explanation is that the volatility of renewable energy output causes utilities to start and stop gas fired plants. At startup, a lot of fuel is burned before electricity is generated for the grid.

Significant economic and reliability costs are associated with integrating renewable generation into California's existing grid.  In addition, the environmental benefits of increased renewable energy generation are less than expected because of the significantly larger number of daily starts of fossil fuels units. Devising operating protocols that require fewer starts of fossil fuel units and reduce volatility of the injections of renewable resources would have significant economic, reliability, and environmental benefits.

The researchers also compared their California results with the Canadian province of Alberta, Australia, and Spain, all of which have significant amounts of intermittent renewable generation resources. They found similar results. In fact, the ratio of intermittent renewable energy generated to fossil fuel burn avoided seems to become smaller as the penetration of renewable generation increases. 

The researchers are constructing a mathematical model to realistically capture the details of the transmission network and generation unit operating constraints for the California ISO control area. The model will then be used to evaluate the reliabilty, economic, and environmental costs for renewable power plants of various sizes and locations on the  California grid. Similar models are being developed for Alberta, Australia, and Spain.

Publications and media:

"Level versus variability trade-offs in wind and solar generation investments: The case of California" The Energy Journal 37 (2016): 1-36.

"Simulating the interaction of a renewable portfolio standard with electricity and carbon markets" The Electricity Journal 28 (2015): 1-15.

"Carbon in the classroom: Lessons from a simulation of California's electricity market under a stringent cap-and-trade system" The Electricity Journal 26 (2013): 8-21.



Awarded 2012