Dive Brief:
- Anticipation of high levels of renewable energy caused power regulation requirements to roughly double in the California ISO’s (CAISO) system, reaching as high as 800 MW a day during the first quarter.
- As requirements increased, prices for those ancillary services also increased, roughly tripling to about $15/MWh from about $5/MWh, according to CAISO’s first quarter report.
- The increase in prices caused total payments for regulation to increase from less than $100,000 to over $400,000 per day.
Dive Insight:
Intermittency usually dominates discussions around the effects brought about by the growing share of renewable resources in power grids, but a higher proportion of renewable resources also creates lesser-noticed challenges and opportunities.
Conventional generation provides physical characteristics to the grid that are not provided by resources such as solar and wind power. In deregulated markets, those characteristics are supplied via markets for ancillary services.
Navigant Consulting has estimated that by 2022 energy storage will be delivering between 3 GW and 7 GW worth of frequency regulation services.
CAISO has been seeing ever higher levels of solar power on its system. In the first quarter, solar generation set a new peak at just over 7,500 MW and routinely provided 5,000 MW during midday hours. That is an increase from about 4,400 MW during the same midday hours in the last quarter.
On Feb. 20, requirements for regulation, both up and down, roughly doubled, being set between 600 MW and 800 MW. Requirements reached 800 MW on several days when high amounts of renewable generation were forecast and ISO operators required additional regulation availability to accommodate potential renewable generation volatility, according to the CAISO report.
In that period, day-ahead prices for regulation up and down averaged $14.81/MWh and $12.92/MWh, respectively, compared with $6.50 and $4.16 before the change was implemented.
CAISO said it was unlikely that market manipulation was behind the price increases. “We did look at bid behavior and didn’t see it [had] changed,” Gabe Murtaugh, a department senior analyst, said during a call to discuss the report, according to RTO Insider. “We don’t see any evidence of market collusion or anticompetitive behavior.”
