AMBITIOUS OBJECTIVES AND RAPID TRANSITION A Case Study …

AMBITIOUS OBJECTIVES

AND RAPID TRANSITION

A Case Study on California

Electricity Market TransitionSeptember 2017

FARHAD BILLIMORIA

ENERGY SYSTEMS,

UNIVERSITY OF MELBOURNE

15TH IAEE EUROPEAN CONFERENCE

SEPTEMBER 2017

AGENDA

1. Background and Framework

2. Three dimensions of transition

3. Assessing the Californian transition

4. Managing interactions

5. Conclusions and Further Work

MOTIVATION

1. Development of an conceptual framework that provides a top-down

assessment of electricity market transition

2. Integration of social, operational and technology development

implications

3. Assess the risks of energy transition and guide policy-maker focus

Literature Review

• Energy change as ‘socio-technical’ transition (Kern 2008; Geels 2004)

• A co-evolutionary approach to energy transition (Foxon 2010;

Meadowcroft 2009)

• A multi-dimensional concept across political, social and economic

grounds (Geels 2011)

Technology –

Bridging the gap

AN INTEGRATED FRAMEWORK FOR DRIVING

ELECTRICITY MARKET CHANGE

o Electoral and consumer attitudes

o Political and institutional mandates

o Expectations for energy reliability,

security and affordability

Political mandates

and policy goal

setting

Operational grid

management and

models for service

provision

o Electricity security and reliability

management

o System capacity and balancing

o Network reliability

o VRE impacts on security / reliability

o Commercial business model

adaptation

o Technology as a driver and ‘enabler’ of integration

o Commercialisation timescale

o Market impacts

o Funding of technology development

Strengths Weaknesses

Opportunities Threats

SWOT

CALIFORNIA ELECTRICITY TRANSITION: AMBITIOUS OBJECTIVES

Incentive Mechanisms:

• RPS – 25% by 2016 50% by 2030 100% by 2045?

• AB32 - GHG abatement 40% below 1990 by 2030, GHG Cap-and-Trade program

• Tax Credits & Accelerated Depreciation for renewables – expiring soon but for solar

• Environmental regulation – State and Federal

• Technology Grants & Guarantees

2016

Renewable28%

Non Renewable

60%

Large Hydro 12%

2020

Non Renewable

70%

Renewable30%

2030

Non Renewable

50%

Renewable50%

2030 - SB 100

Non Renewable

40%

Renewable60%

2045 - SB 100

Renewable100%

SB100

STRONG MANDATES FOR RAPID TRANSITION…

Evidence of strong demand for

‘environmental goods’ (Kahn, 1997)

DRIVE THE INSTITUTIONAL MISSION

“Lead the transition to a low carbon grid” - CAISO

“Promote California’s environmental sustainability goals” – CPUC

“Committed to reducing environmental impacts of energy use” – CEC

Managing an accelerated pace of transition..

A look back to the California Energy Crisis…• First to rollout retail market reform• Aggressive timeframes• “Crisis by design” (Ruff, 2001)• Reforms halted and wound-back

Relationship between operational grid management on political mandates

RampingFrequency Response

GRID OPERATIONS NEED TO BE MONITORED

Renewable Integration Issues

Variability and Uncertainty

Inverter-Dominated

Grids

System Capacity ROCOF and InertiaSystem StrengthTransient Stability

Voltage Stability

Black Start

Fault Ride-Through

Source: California Energy Commission, GE Western Wind and Solar Integration Study

Resource Adequacy

Storage Capacity

Procurement

SYSTEM RESPONSES AND RISKS

Flexible Capacity

Ancillary Services

Load Serving Entities (LSE)Energy

Flexible Ramping Product

California – Imported Generation

Neighbouring States: Renewable Goals • Oregon – 50% by 2040

• Nevada – 40% by 2030

• Arizona – 15% by 2025

Primary Frequency Response

CPUC Regulation

CAISO Markets

SWOT ANALYSIS: POLICY SETTINGS

Strengths Weaknesses

Political mandates supportive of

acceleration

Institutionally embedded

environmental goals

Historical experience: stop-start

approach to regulatory reform

Transition dependent on ongoing

subsidy/incentives

Opportunities Threats

Emergence of new business

models

Evolution of new market designs

Setting a global example for

energy transition

Consumer impacts of higher

energy prices

Electricity unreliability and

security issues

Federal state environmental

conflicts

SWOT ANALYSIS: GRID OPERATIONS

Strengths Weaknesses

Early identification of problem by CAISO

Regulatory structure gives CAISO ability

to drive market design change

Value put on flexible capacity

Dispatchable reserve margins remain

strong

High degree of interstate interconnections

Increasingly weak frequency performance

Duck curve impacts: more balancing and

flexible generation

Risk of over-generation

Higher costs for consumers

Limited transparency into the price of

capacity

Opportunities Threats

Opportunity to be global pace-setter

Future system services markets

Integration of demand response

Expansion of balancing areas

Renewable integration costs

Accelerated pace of change too fast for

industry and regulatory response

Fossil fuel retirements may strain capacity

reserves

Frequency control and reserve

management

Reduced deliverability of interconnection

SWOT ANALYSIS: TECHNOLOGY ENABLEMENT

Strengths Weaknesses

Strong track record of

innovation

Commercial and academic

R&D programs

Technology developing to deal

with variability / intermittency

Cross subsidies

ISO operating frameworks

Opportunities Threats

Inverter-led grid integration Technology funding models

Commercialisation timeframe

INTERACTIONS NEED TO BE CONSIDERED

Consumer opinion,

political mandates

and policy goal

setting

Operational grid

management and

models for service

provision

Technology

enablement

Consumer opinion

Institutional mission / vision

Costs: system, retail, wholesale

Cross-subsidy

Reliability (perception/actual)

Pace of regulatory change

Government relations

Political mandate

Reliability – capacity, ramping

Security - frequency control, inertia, transient stability

Participant economics and business model change

Environmental, physical and technical constraints

Interconnection – constraints, flows, future direction

Integration costs

Markets vs central planning

Secure and Reliable Grid Operations

Operational frameworks for new technology

Cost and subsidies

Timeframes and commercialisation

Technology gaps and funding direction

Funding models

Technologies for inverter dominated grids

Technology enablement

CONCLUSIONS

• Presented a framework for assessing energy market transition based on

policy setting, grid operations and technology enablement

• Observed strong interactions and co-dependence between each dimension

of transition

o Timeframes vs market design

o Long term reliance on inter-connections

o Challenges of an inverter-led grid

o Funding and commercialisation

• Further work:

o Conceptual Practical scoring methodologies

o Transition management framework integrating policy, operations & technology

THANK YOU FOR YOUR TIME

QUESTIONS?