One of the most remarkable trends in the energy sector in the last decade is the meteoric rise of renewables.
The U.S. Department of Energy reported that land-based wind generation capacity in the United States grew from 40 gigawatts (GW) in 2010 to 120 GW in 2020. According to the U.S. Energy Information Administration, U.S. solar capacity has risen from less than 5 GW in 2012 to more than 65 GW in 2022.
The sheer number of planned renewable energy projects suggests that this sharp upward trajectory won’t slow anytime soon. Lawrence Berkeley National Laboratory found that as of the end of 2021, more than 600 GW of solar capacity were in the interconnection queues of North American grid operators. That’s up from just over 100 GW of capacity in 2016.
The deployment of renewables is a critical step toward combatting the climate crisis. But the trend also poses new challenges for utilities and other power providers, who need to rethink how they analyze electricity markets and operate their generation fleets.
The weather-dependent nature of wind- and solar-power generation means there is much more uncertainty about whether there will be enough power to meet the demand on the grid. This can translate to volatile electricity prices. Over the last five years, daily price ranges among North American grid operators have grown by an average of 300% and by as much as 600%, according to data from Yes Energy, an energy market data provider.
“The growth of wind and solar makes it much more difficult to predict market prices,” said Cliff Rose, an analyst at Yes Energy.
Consider this scenario: A region’s wind power projections are overestimated by hundreds of megawatts. To address the shortfall and meet demand, a utility must purchase expensive power from power plants that only come online during high-demand periods. This drives electricity prices up.
Generating too much power relative to demand can also be a problem. Large-scale solar and wind deployment in remote areas is increasing congestion — a condition in which there is not enough capacity on transmission lines to transmit excess renewable energy to population centers. Congestion can increase the costs of running the grid and lead to higher electricity prices (see chart below).
Average hourly price increases due to congestion in North American grids, 2017-Q2 2022
In many cases, grid operators temporarily curtail overproducing plants to relieve congestion. To avoid these outcomes, renewable plant operators often pair their facilities with battery storage.
Informing where to site plants
It’s challenging to fine-tune the balance of supply and demand without understanding how markets are performing. That’s why robust market data is essential for utilities and independent power producers that own and operate solar, wind and other generation facilities in wholesale electricity markets.
What’s more, the data required to make decisions in today’s rapidly changing markets needs to be much more detailed and closer to real time. That’s why, while many markets used to publish price data monthly, some markets now provide data every five minutes.
Increasing congestion and price volatility mean that the financial return and grid benefits of a power asset can vary widely depending on its location on the grid. “The economics of a power generation project may be much different depending on which side of a transmission line or substation it’s on,” noted Will Dailey, Yes Energy’s chief commercial officer.
Granular data on power flows, congestion and prices can help plant owners make good decisions on where to site these facilities to optimize economics and grid operations. It can also help power companies understand how grid and market conditions drive fluctuations in the prices they receive for the output of their existing power assets. “If you don’t have the most current data to help you understand what’s happening on the grid, you have no idea why your revenue is fluctuating,” Dailey stated.
Good data, good decisions
Data informs good decisions about how to operate power plants. If wind or solar forecasts for an area fall short, a utility or other power provider may need to decide whether to start production at gas-fired power plants to make up the shortfall. Since it can cost tens of thousands of dollars to turn on a plant, the provider can use wind forecasts, demand forecasts and market price data to determine if this is a smart economic decision.
A regulated utility operating outside of a wholesale market can also benefit from good market data — particularly if its service territory is connected to wholesale market regions. If the utility has excess solar or wind power supply that outstrips the demand of its customers, it can use price and congestion data to determine the best market in which to sell the power.
Additionally, if a utility is contending with increased grid congestion, good data can shed light on the causes and impacts on electricity prices and grid costs. These insights can help utilities identify the optimal grid upgrades to alleviate the congestion — and justify the investments to regulators.
Putting data into context
Advances in data aggregation and analysis can help utilities and other power providers interpret the rapidly growing number of data resources. Yes Energy offers comprehensive power market data and analytics tools, providing utilities, generation owners and market traders with actionable insights to address real-time and future problems.
“There are a lot more different types of data available today,” Dailey said. “We bring all these data sources together in one platform to provide a clear visual picture of what’s happening in electricity markets. Our expertise is in presenting data in a way that puts it into context.”
“We’re still in the early stage of understanding how markets will behave with growing renewable penetration. We’re going to learn more about how to site and operate these assets and how they’re affecting grid conditions and economics,” he added. “To understand these trends, it’s more important than ever for a utility or renewable plant operator to look at detailed data so they can stay competitive.”
