What’s the Point of an Electricity Storage Mandate?

An aptly named picture – the “duck graph” – is captivating the California energy policy world. It depicts electricity demand net of projected renewable generation (“net load”) on a representative day in the not too distant future.

duckgraph_Page_3

The Duck Graph

One point of concern is the duck’s long neck, representing a 14,000 MW swing in net load in a roughly one hour period from 5 to 6PM. Currently, the largest swing system operators typically have to deal with is less than half that size. Adding insult to injury, the duck graph swing is projected to happen in shoulder months like March or October, when total system load will be low.

The duck graph encapsulates the collective uncertainty about how the electricity system will operate as the state adds more and more renewables. If the California electricity system has significant solar capacity, what happens on a typical March weekday when the sun gets low on the horizon just as office buildings are turning on their lights? How will system operators deal with a wild swing in net load as they lose solar generation?

One answer policymakers are offering is electricity storage. For example, the California Public Utilities Commission is in the process of implementing legislation requiring it to consider electricity storage procurement mandates.

I am accustomed to thinking about electricity storage as an arbitrage play – capture energy in the middle of the night when prices are low, store it until the middle of the day when electricity prices typically double or even triple relative to 12 hours ago and then sell at a substantial margin.

But, regulators seem interested in storage primarily as a resource to provide the capacity necessary to address the operational issues associated with the duck graph. (Why the duck graph is not projected to generate very low energy prices at the duck’s belly and very high energy prices at the duck’s neck could be the subject of another post.)

What gives me pause is that the policymakers seem to be legislating a means to an end rather than the end itself. If we want to address the duck graph, why not set up incentives that reward behaviors and technologies that help smooth the worrisome swing in net load from 5 to 6 PM?

For example, why take load as given? In other words, why subsidize storage operators to smooth net load fluctuations before giving consumers the ability to shift their loads?

Until my family switched to the PG&E SmartRate (inspired by Severin’s blog post), we had no incentive to run the dryer after 8PM instead of from 5 to 6PM. We paid $.31 per kWh no matter when we dried our clothes.

Now that we are on the SmartRate, we try to keep our electricity consumption low from 2 to 7 PM on SmartDays (roughly, the 12 hottest weekdays each summer). As we tried to figure out how to do that, we learned that our dryer is a major part of our midday load, so we try to keep it off when prices spike.

The SmartRate was not designed to address renewables integration. The problems highlighted by the duck graph are most pronounced in spring and fall months, when the sun sets before the daytime load subsides. Presumably, though, similar dynamic pricing schemes could incentivize consumers to shift their load to help smooth the duck graph. Given that the vast majority of households are starting from prices that do not vary at all over the course of the day, week or month, I have to believe that there’s room for improvement.

Ideally, regulators should pit storage providers against pricing schemes that reward consumers for shifting their load, and any other technologies that can help shorten the duck’s neck. That way, the market can make the call about the best way to integrate more renewables.

We don’t want storage just to have storage; we want services that storage providers can supply. But, if there are cheaper ways to achieve the same objectives, policy should be designed to find them.

About Catherine Wolfram

Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, Co-Director of the Energy Institute at Haas, and a Faculty Director of The E2e Project. Her research analyzes the impact of environmental regulation on energy markets and the effects of electricity industry privatization and restructuring around the world. She is currently implementing several randomized control trials to evaluate energy efficiency programs.
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35 Responses to What’s the Point of an Electricity Storage Mandate?

  1. art2science says:

    Very interesting. What happens in 2015 that leads to a 2GW shift? Presumably the duck graph is driven by solar; are there huge centralized solar facilities scheduled to come on line that year, but not sooner?
    Your basic point about demand response is important. There is a lot that commercial buildings could do, for example by turning their chillers way down in hour 17. (If it’s in May/October, they could probably just coast for the whole hour.) The problem shown by the diagram is going to be ramp rate of generators, so even a one hour response will be very helpful.
    I have also always wondered about agricultural and other pumping loads e.g. aqueducts and wastewater treatment. Such loads almost never need to run at 100% over 24 hours, so going down for an hour is quite feasible. Possibly they are already doing this, but I’ve never seen it discussed.
    One other factor implied by the diagram – time scales less than an hour will be very important to track the extremely steep ramp. So will real-time, rather than day-ahead, signals – whether price or quantity. If a load can afford to shut down for exactly 75 minutes, for example, is it better to start at 4:30PM or 5:05PM? I don’t think households will want to deal with that kind of time scale, but large loads certainly can.

  2. Jack Ellis, Tahoe City, CA says:

    Catherine, your post is eminently sensible, but regulators and in this case politicians don’t worry too much about what makes sense. Instead they tend to listen to those who know the least and ignore anyone who tries to lay out the facts.

    I am a party in the CPUC’s storage proceeding (R.10-12-007) and have written extensively about the folly of the legislation. I’m convinced the mandate is a huge waste of money, in part because there’s not enough price variability (or price volatility if you like), in part because there’s not enough information about intra-day forward prices, and in part because the ISO auction market structure makes economic use of storage needlessly challenging..

  3. Michael A. Green LBNL retired says:

    Mike Green, Redwood City,

    Jack Ellis is correct I am afraid. The ignorance of our politicians is astounding. I fear that the PUC, which is driven by politics isn’t much better. Regulating demand by pricing electrical energy correctly may be far more effective than paying for expensive energy storage. I don’t trust the folks in Sacramento to make the right decision. Use the smart meters for pricing. Use the smart meters as a means for telling user when they can and should use more electricity or less. For homes and small businesses the missing link is a method for telling the user to change their usage to their advantage. In Norway, electricity used to be prices according to the amount used. A homeowner had a power meter in the kitchen that told someone (usually the wife who was expected watch out for the finances) when they were using power at the higher rate (typically twice the base rate). With smart meter technology the small business and home owner could be told by the electricity provider when was the most economical time to use electricity. The web is not the answer and for many it isn’t their smart phone either. With either you have to ask for the information. It is just better to provide that information on a real time basis in the house or business.

  4. Rafael Friedmann says:

    Energy efficiency will cut the length of the neck of the duck significantly – like Catherine says–just a matter of making this need more ‘visible”. Solar will pressumably get rid of the mid afternoon peak (where most of the incentives reside today–including peak load pricing demand response schemes). More efficient lighting, continued improvements in A/C and building shells – can all reduce the size of the 14 GW ramp for a lot less than what storage is likely to cost. Electric vehicles might also add to the options.
    Regarding your clothes drying Catherine–how about that old fashioned, UV innoculating method known as drying in the sun? That’s even better for reducing both the daytime and evening load.

  5. Gilbert Adjoyi says:

    Geothermal is another technology that can be most effectively used to lower the duck’s neck as a peak plant technology but not in California with its suspected attendant undesirable tectonic consequences. If California draws large energy from the rocks, the vacuum could create forces that can result in earthquakes or tremors. If this suspicion is true, then thank God the use of Geothermal is going down.

    Hydro is also mentioned as a technology that can be used to lower the neck, but California and water scarcity may make hydro not the ideal solution. No advocating here for pumping back water.

    Pricing to induce neck lowering consumer behavior could provide some solution especially if combined with real time warning to users when the use is started. .The cost of equipping businesses, offices and homes with such real time warning technology can be covered by keeping the prices as they are during the duck belly times. Similarly, Solar installations have comparatively higher initial investment, which the investors might desire to recoup much faster during the initial stages of the investment. Keeping the prices the same at the duck’s belly times could help achieve that goal.

    The above notwithstanding, the regulators are justified, to some extent by advocating for storage mechanisms.

    Solar as mentioned is the technology that would define the duck’s belly in 2015 onwards. If solar energy is not stored, its use in lowering the duck’s ostrich-like neck could be impossible for the days and times most desired.

    Time-of-use pricing, though dynamic, may not be adequate to lower neck to levels that would be desirable. Combined with storage mechanism, both the peacock-like tail and the ostrich-like neck could be lowered to levels that are desirable and keep capacity wastage down as plants that serve only peak periods may no longer be needed.

    So the legislators are not completely wrong on their policy choices. What is left is to inform them to add the pricing and real time warning solutions to their policy considerations.

  6. art2science says:

    Mike, the real-time information about usage is now feasible even with the current meters, isn’t it? If people don’t want to use their cell phones for push alerts, a $40 third-party device (the price of a cheap cellular phone) sitting on a table can pull the data either by Wi-Fi or text messages. I get push text messages like this daily from various services on my cell phone – I don’t have to ask for them.

    It’s suboptimal compared to directly reading your own meter, of course. But push data has become common and accepted in various contexts, from police alerts to sports results.

    In any case, the big storage-type loads that CW wants will not be in households. There are a lot of automated industrial loads that can’t cheaply be shifted by 6 hours, but 30 to 90 minutes is not hard. But the price incentives have to be high enough to make it worth programming.
    “(Why the duck graph is not projected to generate very low energy prices at the duck’s belly and very high energy prices at the duck’s neck could be the subject of another post.)” I’m certainly curious about that.

    • Jack Ellis, Tahoe City, CA says:

      “Why the duck graph is not projected to generate very low energy prices at the duck’s belly and very high energy prices at the duck’s neck could be the subject of another post”

      I’m familiar with how those prices were derived and I think I can answer at least part of the question. There are unlikely to be very high prices at the duck’s neck for two reasons: a surplus of fossil-fired generation in most hours that will likely last beyond 2020, and no mechanism for pricing scarcity when ramping is in short supply. They are very unlikely to be low at the duck’s belly because the working assumption is that gas-fired generation is on the margin and would be paid it running cost.

      Getting prices that make sense in light of system conditions requires doing things neither the CPUC nor the California ISO nor politicians will find palatable, including a) allowing suppliers to reflect scarcity in their energy bids (which raises concerns about exercise of market power), keeping installed reserves on the lower side of the CPUC’s planning targets (which raises concerns about exercise of market power and rolling blackouts), and getting rid of make-whole payments under certain circumstances when generator revenues are deemed inadequate to cover reasonably incurred costs.

      So long as policy is being driven by politics, storage is an easier solution, even if it’s more expensive.

  7. Catherine Wolfram says:

    Thanks so much for the thoughtful comments. Here’s another important note about the duck graph, which a reader sent to me by email:

    Your post today using the “duck curve” to motivate a more holistic discussion of options rather than to simply justify electricity storage makes one of the mistakes that many others are making.

    You say, as others have, that this is a typical day when it is actually not especially typical. I have constructed many “duck curves” and only those with a particular sets of daily solar vs wind production profiles and mixes of resources emphasizing high solar penetrations produce this particular shape.

    The ISO popularized this specific shape as part of their advocacy of adding a flexibility requirement to resource adequacy. In so doing, they were looking for the maximum 3-hour ramp rate for each month. This kind of shape appears using the hourly production profiles for wind and solar from a specific day in a recent March day then accentuated by a rapid increase in solar PV resources across future years. You should not assume that this is a typical day nor that it is immutable. There are a variety of ways that renewable resources will not produce energy in this shape and yet additional ways that the “gross” load curve from which wind and solar production is subtracted to determine a “net” load curve might itself have different shapes.

    – CW

    • Jack Ellis, Tahoe City, CA says:

      …which is yet another reason to emphasize changes in consumer behavior and avoid building expensive hardware that is likely to sit idle most of the time.

    • Richard McCann says:

      I was going to post a similar comment. The CAISO put up this graph as just one scenario, and it has become apparent to the most knowledgable that it is not representative. However, policymakers have still hung on to the image.

      But I would make two more points:

      1) The demand for storage isn’t driven by what is a forecasted relatively long and continuous change. It’s to meet unanticipatable short duration high frequency generation changes. That’s been the target market. Whether storage is the correct approach is stll open to question, but it’s different than what is shown with the duck graph.

      2) The simpler and perhaps most cost effective solution to problem posited in the duck graph is a straightforward contractual one: Pay solar generators to follow controlled ramp schedules that limit the hourly rate of change in their output. They can ramp up more slowly in the morning and ramp down earlier in the evening. The starting point of the contract payment would be the lost energy revenues, which almost certainly would be less expensive than either flexible capacity investment or new storage.

  8. Bill Henry says:

    Isn’t the main problem with CAISO market pricing the small energy volume that clears the market? My understanding is that most generators self schedule without submitting economic bids; it’s hard to have market prices that reflect actual conditions if the utilities aren’t buying power in the market.

    • Richard McCann says:

      Much of the energy is transacted in long term markets, as it should be. The major mistake in the 2000-01 crisis was that utilities were not allowed to make long-term purchases, and even existing utility assets were repriced through the day ahead and hour ahead markets. The CAISO markets reflect the residual market prices.

    • CoastDaylight9899 says:

      Great ideas! I agree with your statements. Its good not to use a lot of power when electricity prices skyrocket. Better to be safe than sorry when it comes to money in the electricity business.
      CoastDaylight9899

  9. Steven Rudnick says:

    This sounds to me like a non-systems engineering rant. The technology will not develop without government mandate, and probably some government support. There is too much inertia in the business as usual thinking in both the supplier and consumer sector.
    Think hydrogen. It solves many if not most of the problems.

  10. Jason Burwen says:

    I agree, Catherine, that proper valuation of energy is the most efficient approach. CAISO, for example, could create a new product class like “fast-ramping resources” that then receives bids and clears in the most efficient manner. And indeed, time-of-use rates (as well as demand response programs that properly remunerate demand reductions) can mitigate rapid and sudden supply-demand imbalances.

    That said, it seems to me that the CPUC energy storage mandate proposal is intentionally choosing to prioritize market certainty for energy storage project developers. I think there’s some sense to this. For one, initial grid storage deployments will be the most expensive and risky projects, and a storage mandate lowers risk much in the way RPS provided certainty for early renewable energy project developers. It also drives learning-by-doing–which is particularly important with new technologies and the technically sophisticated systems that characterize utility and grid operations. Similarly, valuation and bidding rules for energy storage probably need to develop further before major capital will be sunk for grid storage (although not for behind-the-meter storage, which appears to be moving along well)–and a learning-by-doing, supply-push approach may catalyze rule changes faster than without many additions of storage occurring. These efforts will certainly cost a lot–we know several billion dollars would be a given–but they may increase the ability of the grid to integrate variable resources at a rate faster than would happen without a mandate. If the mandate drives energy storage unit costs down through learning-by-doing and economies of scale, there is value in that as well–and value which accrues beyond just California. Not insignificant if you want to decarbonize energy more generally.

    (Then again, you could argue that the CPUC shouldn’t be running green industrial policy, and it’s not the job of CA ratepayers to assist with market transformation. Valid as well, and a debate perhaps worth having.)

    All this is not to say that the CPUC is correct, but rather there is a trade-off. Is the value of market certainty for project developers (and the attendant developments) greater than the lost value in energy market inefficiency? Over what timeframe? In year one, it’s obvious that the lost value of market inefficiencies are far greater than the value of new storage investment. But what about in year five? Ten? Particularly since the mandate ends at 1.3 GW, it seems like the market inefficiencies will be temporary.

  11. Mark Lively says:

    Steve Rudnick wrote “The technology will not develop without government mandate, and probably some government support.” The better response is that the technology will not develop without economic incentives, such as better real time prices, that reward such technology. Having prices that swing massively was the loads swing massively will provide the incentives for load shifting mentioned by others and for entrepreneurs to try technologies that have yet to be proposed. But, I have said this already in the California storage initiative.

  12. Jim McMahon says:

    As you point out, the load should not be treated as fixed, and incentives should be aligned with the goals. Loads can be dynamic and responsive, if prices correspond more closely with the costs, and if two-way interaction between price signals (to consumers) and responses to loads (by customers) are facilitated. I am not opposed to some support for storage, whether central or decentralized, but agree that (electrical and thermal) storage should compete with the enormous potential from responsive demands.

  13. Alex Ghenis says:

    Unfortunately, your post is overly optimistic about the prospects for pricing-based demand response to help solve the “duck chart” problem. Your anecdote about your household smart meter is actually a perfect example: the smart meter bumps your household energy pricing for five hours on 12 days per year (60 hours total). These are relatively long time frames implemented infrequently, and require such simple customer action as shifting dryer loads a few hours later in the day. Widespread deployment of smart meters, customer tariffs, and effective communication accurate enough to provide the amount and specificity of demand response is either far off or entirely unattainable. Basically, expecting customers to predictably respond to the setting sun is not a realistic way to operate the grid. Are they supposed to not turn on their lights when the sun sets (a significant reason for the “neck”)? All the sudden shut down computers? And what type of radical, accurate pricing scheme and communication will realistically provide that demand response on a reliable basis? Demand response can contribute to cutting down the duck’s neck, but it’s by no means a solution to the problem. Energy storage has been shown to be able to reliably provide such time-shifting services in a way that provides grid reliability and stability. That’s why it’s important to get moving on integrating storage into the grid, and providing goals that realistically support its needs.

    You generally point to energy storage procurement targets as unnecessary because some sort of tariff could provide enough demand response to eliminate the need for storage. Under the storage rulemaking, though, energy storage resources are being procured because energy storage can provide multiple benefits, even from one resource. So in addition to managing the “duck chart,” an energy storage resource could provide regulation, spinning reserve, reliability, transmission upgrade deferral, and more. Each of these grid needs will increase with continued integration of intermittent renewables and the retirement of both SONGS and OTC power plants. Energy storage resources have also been recognized as providing far better performance than conventional resources for multiple ancillary services, namely regulation – thus their strong value under FERC’s Order 755 (pay-for-performance). These are exactly the types of services that pricing-induced demand response simply can’t address. Energy storage in general is thus nearly a practical necessity; and if one resource could provide ancillary services and demand response-style timeshifting, all the better.

    As for this notion that the energy storage resources procured pursuant to the Storage OIR will somehow be a waste of money, the targets specifically call out cost-effectiveness as a requirement. That means that procurement is evaluating whether storage resources provide services cost-effectively, and do so beneficially compared to alternatives. This is also with forecasted grid characteristics, including pricing systems and demand response – so energy storage will still be appropriately procured even with your proposed pricing panacea (which is actually one piece of the energy transformation puzzle).

    Finally, this is shaping long-term grid investments. The CPUC and CAISO recognize that there will be pricing reform, and are looking toward demand response to provide some help to upcoming supply & demand changes. But they’ve also recognized that grid-connected energy storage will be a necessity for providing cost-effective grid stability with the SONGS closure and OTC retirement, plus expanded renewables. Other resources are procured with years- or decades-long operation in mind; we can’t shape a clean and functional energy system by simply instituting pricing schemes and hoping that supply & demand will respond accordingly. We have to identify the best resources and get them plugged in in time to keep things running. The CPUC has done that for energy storage, and it’s a wise move.

    • Jack Ellis, Tahoe City, CA says:

      “But they’ve also recognized that grid-connected energy storage will be a necessity for providing cost-effective grid stability with the SONGS closure and OTC retirement, plus expanded renewables. ”

      I’m not so sure about the necessity part, especially as it related to “shaping a clean and functional energy system”. Moreover, as far as I can tell the mandate comes from the Governor’s office, which has preempted the CPUC by forcing it to issue a ruling before the technical analyses are complete that show where storage is cost-effective and practical, and where it is too expensive and/or impractical.

      If you want to understand the practical realities of using storage to displace most or all fossil-fired generation, read Dr. Thomas Murphy’s blog at http://www.resilience.org/author-detail/1154228-tom-murphy, and in particular, his posts on batteries and pumped storage. If you’re still not convinced, consider this thought experiment. California currently consumes about 660,000 MWh of energy per day on average. It’s reasonable to assume that at least one day’s worth of energy storage will be required to support a clean and functional grid if all nuclear and fossil-fired generation is eventually retired as some advocate, because there will be days when the sun doesn’t shine and the wind doesn’t blow. Now imagine a pumped storage plant with Lake Tahoe as the upper reservoir and some sort of man-made reservoir at an adjacent location in the Sacramento Valley. The height of the bathtub ring at Lake Tahoe would be at least five feet, and Lake Tahoe is arguable the best, most suitable, cheapest place to build lots of energy storage at low cost from a purely technical perspective. Spreading out the impact among a number of pumped storage plants along the Sierra crest would require about 100 plants the size of PG&E’s Helms project, with a lot of extra transmission and the attendant environmental impacts, assuming one could find enough workable locations.

      The mandate is grounded largely in wishful thinking rather than a thoughtful analysis. I think there are applications where storage makes a lot of sense, but I object to any suggestion that the mandate was necessary because there’s no evidence that it is.

      • Chris Edgette says:

        The same arguments were used against solar. “Traditional generation is cheaper.” “Current system sizes will never be able to provide for our energy needs.”

        Now we are realistically chasing $1/watt installed cost in solar and systems are nearing 1GW in size. Technological development requires vision. The proposed procurement targets, unlike those for solar, specifically require that the systems be cost effective over their system life. Your argument that we should not pursue cost effective storage now because you cannot visualize how storage can immediately solve all of our peak load problems is limited and limiting.

        Our state’s economy is driven by vision, from Apple to Google. Imagine if Apple had built a prototype iPhone and declared, “That cost us a million dollars! No one will buy it!” Imagine if Google had said, “AltaVista already exists! No need to improve search!” Many of us see beyond the near term barriers and see invention as a reasonable path to pursue.

  14. Jack Ellis, Tahoe City, CA says:

    Chris, I never said we should not pursue storage. I’m simply adamant that a mandate is unwise, unnecessary and needlessly costly. The cost of solar has come down and mandates might have something to do with it, but no one I’m aware of has attempted to objectively assess whether the early costs are likely to be worth the purported future benefits.

    If storage is cost-effective, it should be installed. if it isn’t, subsidies are a very expensive way to drive down costs. And if storage technologies are not mature enough, deploying lots of it is wasteful. In February, I learned that batteries delivered for two different utility projects – both in California I believe – caught fire. Another battery project in Hawaii was consumed by a fire shortly after it was installed. Little needs to be said about Boeing’s experience with advanced lithium ion batteries. These problems will almost certainly be solved, but not by deploying storage for its own sake.

    I also think you’re stretching the analogy when you compare investments by Apple and Google using private capital with investments mandated by government bureaucrats using taxpayer or consumer money. They aren’t the same. Particularly in California, politicians can spend money with surprisingly little accountability and no real responsibility for the consequences. For that reason, they should be a bit more cautious than a private enterprise.

    • Chris Edgette says:

      Jack – If you think technology companies have received no government support, I am not sure what to say. They get massive tax breaks – and the internet itself was built on government research (which was quite a good investment, in my opinion).

      Regardless, as you well know, the proposed energy storage targets include a cost effectiveness requirement, so it seems as though your cost concerns have long since been answered. I am not sure why you keep pressing those points.

      Finally, since we are evaluating risk, we should probably compare energy storage and renewables to the alternatives: fracking, oil production, and coal mining. Modern storage technologies which have a fire risk are now fully contained with fire suppression, and the vast majority of energy storage worldwide (well over 100GW) has absolutely no fire risk at all. It is clear that a historical risk evaluation of storage plus renewables versus fossil generation would be a bit lopsided. I think that legislators understand this and are acting appropriately.

  15. Jack Ellis, Tahoe City, CA says:

    The Internet was, indeed, built with government money, but the amounts were modest and no one was required to buy or use the service. In that respect, it is different from a mandate. The proposed ruling does include a limited off-ramp based on cost-effectiveness and it requires the IOUs to conduct a cost-effectiveness analysis, but I’d be much happier if the ruling imposed a requirement that all projects be cost-effective.

    As for risk, every technology carries at least some, including renewable energy. I’m not suggesting the risk has to be zero because that’s not feasible, but I do think it makes sense to be a bit more cautious. Just as it took some time to learn how kerosene and gasoline could be used and sold safely, so it is with storage, in which large amounts of energy are contained within a small package.

    I’m afraid I don’t have a very high opinion of legislators, who are driven to demonstrate a record of accomplishment without regard for the long-term impacts and who are typically not energy subject matter experts. If they really understood all of the economic, environmental and political implications of a 100% renewable energy supply, they might make a whole different set of decisions.

    After reading your posts last night, I was reminded of another reason for foregoing a storage mandate. California’s investor-owned utilities recently spent several billion dollars to install what some people refer to as “smart” meters. After all is said and done, the only real benefit they provide is to put meter readers out of work. They don;t play well with energy management devices, consumers don’t receive real-time prices, and even if consumers did receive price information, it’s not presented in a way that’s actionable. It’s not that I don’t like interval meters, because I think they’re a fine idea that’s long overdue. What I do find objectionable about the interval meter deployment is a) the flawed business case that counted on consumers savings for a significant part of the justification, b) they don’t work as advertised (home energy management interface), c) the job was rushed in order to mine federal stimulus money.

    So once again, I don’t object to storage. I object to the mandatory targets, because I think it’s the wrong way to roll out the technology. Storage providers should be focused on cost-effective applications that don’t require the blessing or involvement of regulators, the legislature or the IOUs There’s still a significant risk that regulatory intervention will mess things up, but that;s a problem I’d gladly take on to avoid the complexity and bureaucracy of the regulatory process.

  16. Bill Henry says:

    You’re right, compelling utilities to move all energy thru the PX spot market ended up being the wrong way to run a market. So now they seem to do as little of that as possible and self schedule with contracted generators. The problem is the ISO cannot dispatch this generation, limiting flexibility to manage all the new duck ramps. The ISO needs more flexible generation, that means fewer self schedules and more real time market dispatches.

    • Richard McCann says:

      The ISO has the capability of contracting and scheduling flexible ramping capacity through its ancillary services markets. The LSEs can decide on an economic basis whether to self schedule in the DA and HA markets or submit bids into the various AS markets. I’m not sure of the limitations on scheduling inherent in the bilateral contracts (because they are confidential), but it’s up to the LSEs to determine the mix of flexibility over time. Right now, the mix appears sufficient, but we may not know whether the mix in the future will be sufficient.

  17. Alan Lamont says:

    The discussions above touch on many salient points. I don’t mean to be repetitive, but there are several key issues that should be emphasized.

    One: In this application the storage is simply used as a generator. But it is a generator with a small, and expensive, fuel tank. It will most likely be “fueled” by natural gas since natural gas is likely to be on the margin when it charges. Given the efficiency of storage, its fuel will not be especially cheap on most days of the year–not expensive, but not cheap either.
    As a generator a storage device has some advantages: for some technologies, there is no start up costs (unfortunately that is not true of CAES) and very short start up time.
    While these are clear advantages, they are pretty marginal. Conventional generators can serve nearly as well.
    Overall, we have to recognize that in this application storage is not doing anything that we cannot already do. It might be a little better, but it is not different.

    Two: Other commentors pointed out that this particular shape with the very steep late afternoon ramp is a result of the assumptions that CAISO has made about the penetration of solar generators. If we were to install as much solar as is assumed, we could have these ramps. However, the level of solar generation that is assumed drives the net load during the day down to the levels that are seen overnight. This implies that generation prices will be very low during the day. These prices will be too low to sustain the assumed investment in solar. From an economic standpoint, it is unlikely that this scenario will actually come to pass (unless there is a government mandate).

    Three: This particular load shape only occurs in the winter, spring, and late fall when the sun sets early in the day. During the summer, when the system is strained, the solar generation continues late enough that we do not see the fall off in generation during business hours and we do not see this late afternoon ramp in net load. This implies that storage device will only earn revenue from serving this ramp part of the year. Moreover, the ramp only occurs in months when there is actually considerable generation capacity available to meet the ramping needs.

    Overall, we need to be more careful in accepting the underlying premise of of the net load shape, and we need to recognize that storage is not unique in being able to meet this need.

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