Michael Giberson
Last week the New York ISO filed proposed tariff changes with the Federal Energy Regulatory Commission to revise how it treats wind power generation in its markets. Under the NYISO’s current rules, wind power generators are not treated as flexible resources. When the transmission system is overloaded, other generators can be asked to back down but wind power would not be reduced under most circumstances. (Under current rules wind power can be backed down in extraordinary cases, via a cumbersome process, and sometimes generators back down voluntarily due to low prices.)
Under the proposed rules, wind power generators would be treated as flexible resources by the real time market system for output levels from zero up to the forecasted wind power output level. The practical effect would be to allow the system to back down wind and non-wind generation in comparable fashion as needed to resolve congestion on the transmission grid. Wind power generators would submit energy bids into the market like most generators and the ISO market would use the bids to work out the least cost method for resolving congestion.
While the change could result in wind power generators being directed to reduce output more frequently than under current rules, the NYISO said the change would likely increase the overall amount of wind power taken by the system. Under the current, manual procedures for directing reductions in wind power output, it is hard to get just the right amount of power off the system. The NYISO indicated that sometimes more power has been taken off the system for a longer period than was strictly necessary. In addition, even under voluntary curtailment by wind power generators due to low (and sometimes negative) prices, sometimes more power has been taken off the system longer than was needed to resolve the problem.
Both symptoms of the cumbersome approach now used have resulted in more work for the system operator and a less efficient supply of power. The proposed changes should serve to more finely target any needed reductions in output, allowing a more efficient use of wind power when it is available.
Even with the proposed tariff changes, the NYISO expects that most of the time it will take all of the wind power available to the system. Of course, whether this remains true will depend on the pace of further wind power additions relative to the transmission improvements, if any, needed to support those additions.
The changes represent another step in the direction of the normalization of wind power resources in integrated regional power markets. The rules for wind power will never exactly be the same as the rules for, say, a combined-cycle combustion gas turbine, but then the treatment of that very flexible natural gas unit isn’t exactly the same as the treatment of a less flexible coal-fired steam turbine.
The market design goal should be to maximize the gains from trade produced through the regional power market. The process of adapting rules to the diversity inherent in the generation and demand-side resources available to the system should be undertaken with that goal in mind.
(ASIDE: Elsewhere I have been critical of the way that production tax credits available to wind power generators can distort the efficient operation of power markets. There was some talk about this issue in the recent FERC technical conference on integration of renewable resources, and I suspect I’ll have more to say on the issue in a few days when the transcript is online.
Some critics of current wind power subsidies may object to any normalization of the treatment of wind power so long as the subsidies continue, but I don’t think it desirable to try to fix market rules to compensate for the harmful effects of federal tax policy. Rather, market design should aim to maximize gains from trade given the larger legal and policy framework which the markets must operate in, and opposition to wasteful subsidies in the tax code should be directed to the legislative bodies responsible.)