Much has been learned over the past decade from experience and research in the integration of the variable generation (VG) of energy from wind and solar power plants into an electric grid. Understanding the lessons that have emerged for transmission and network planning, along with market design and operation, is critical to future efforts to integrate higher levels of VG at lower cost.

Think of the transmission network as the glue that holds energy systems together. It connects the base load to generation, allows for large blocks of energy to be moved from where they are generated to where they need to be consumed, eliminates or reduces congestion, and improves reliability. It supports the electricity markets by covering large geographical regions, allowing access to many generation units. This ensures a deep and liquid market, and better management of the aggregate variability in VG.

Networks need to be large enough to cope with increasing generation supply. Expansion of transmission networks is justified based on:

  • economics (resulting in lower cost energy);
  • reliability (resulting in fewer hours of outages); and
  • public policy goals (allowing for the integration of VG from renewables).

Networks also must be well and appropriately managed. Evidence shows that national networks must be managed at the central level to achieve national objectives and fairly balance regional competing interests. A regulatory function at the national level, such as the United States Federal Energy Regulatory Commission and the Council of European Energy Regulators, can be important.

Market Design

National market design creates a level playing field for all participants (generators, transmission companies, distribution companies) by providing the same set of bidding policies, operating policies, and payment policies. As with transmission, a strong regulatory function should also be developed in parallel to ensure fairness in market operation, discourage anticompetitive market behavior, and encourage new entrants.

Market Operation

Given the size and complexity of a well-functioning market, the complexity and expense of the software necessary to operate the market, the operation of the existing infrastructure, and the long-term goals for integrating a large share of VG, it is important to address the following issues as part of a comprehensive market operation.

Balancing Area: System balancing, done over large areas, is critical for reliable system operation. In doing this, countries can aggregate VG across broad geographical regions. This reduces the variability of the output and the cost of integration, and increases the amount of VG that can be integrated cost-effectively.

Reserve Requirements: A large balancing area and associated aggregation benefits also reduce reserve requirements because there is a reduced variability over a larger geographic area, leading to a smaller reserve capacity to manage the reduced variability. In addition, the contingency remains the same and can be covered with fewer total reserves in the footprint.

Unit Commitment and Economic Dispatch: Scheduling and dispatching generation at the market level makes a larger pool of generation available to balance the system load. This larger pool with a shorter dispatch interval provides greater flexibility, leading to efficient and
economical system operation.

Experience pays off

A range of experience has now been developed with the establishment of competitive electricity markets around the world in countries as diverse as the U.S., Chile, Great Britain, Denmark, Germany, and Australia. The experience illustrates that well-designed markets can provide an effective solution for the integration of large amounts of variable generation. But there is no one-size-fits-all solution, and the most custom tailored solutions routinely take 10 to 20 years to develop and mature. While many are still a work in progress, they provide an important guide for those who would embark on the journey.