De-risking curtailment with storage and improved performance
By Clara Midgley, Product Manager, Energy Storage and Optimization, SparkCognition
As the deployment of intermittent renewables continues to increase, energy markets are experiencing increasing volatility, curtailments and smarter buyers. Containment, the deliberate reduction in the ability to balance supply and demand in real time, is either enforced by a balancing authority’s set point or incentivized through negative pricing to encourage operators to stop producing. In CAISO, wind and solar projects in early 2022 saw about double the containment as in the previous two years.
Since customers have negotiated in their PPAs not to pay for contained production, owners and operators must bear the risk of containment by factoring lower production volumes into PPA prices, or risk margin squeeze. This new structure protects customers who hedge market prices with PPAs from paying PPA rates for contained production, but leaves customers with less energy purchased and less renewable energy credit to meet their targets.
Developers can strive to accurately predict long-term containment or locate a project in an area with less local congestion caused by volatility and containment risk compared to the rest of the market. But this is nearly impossible due to the constraints of interconnection agreements and land acquisition, as well as changes in grid conditions over the lifetime of the project.
The lack of an accurate 35-year-old Magic 8 Ball to help predict future conditions means parties are looking for other ways to maintain accurate production visibility while remaining competitive in an ever-expanding market. Artificial intelligence (AI) can differentiate owners and operators by improving their performance predictions and price and weather forecasts for the short and long term.
Options for improved profitability
There are strategies that renewable project owners and operators should consider to maintain overall project profitability when faced with unavoidable curtailments.
Ensuring optimal performance enables asset owners to increase the predictability of energy production.
By taking measures to minimize energy losses and improve performance factors under your control, it is possible to maximize productivity from all active hours. In addition, maximizing asset performance improves power generation predictability by minimizing unplanned downtime and improving predictability.
The more accurate and certain an asset’s production forecast, the more flexibility the operator has to schedule the asset to avoid containment. Containment of renewables often happens in real time due to the inability to constrain less flexible thermal resources that have their schedules set up further in advance.
If grid operators have improved forecasts for renewable energy generation, they will be able to plan more accurately in the day-ahead markets and not have as much variability in the real-time market that must be accommodated by methods such as containment.
AI technology is uniquely positioned to help owners and operators meet these visibility challenges. AI-based models can improve timeliness in recognizing underperformance and improve the accuracy of estimating energy loss due to availability constraint or performance-related events. Another application is improving maintenance planning, such as optimizing solar panel cleaning schedules using energy loss estimates and weather forecasts.
Using Storage may be another method of dealing with containment. By storing unnecessary and otherwise limited available energy, the renewable asset can be sent to a certain extent. A challenge with hybrid asset models is often that the more pessimistic the renewable-only model looks, the more optimistic the storage addition appears. While storage must be modeled in many economic scenarios, value must also be attributed to it as a service to mitigate risk so that the application can run throughout its lifetime.
An indication of the growing reliance on storage to cover solar and other renewable energy projects is a look at the most recent list of pending interconnection agreements in the ERCOT ISO of Texas, a state where solar energy accounts for a small portion of the total energy portfolio, but was subject to twice as much curtailment as wind projects. As of May 2022, more than 300 of the approximately 900 projects seeking approval involved battery technology. Resizing the storage system during the development phase and enabling the correct interconnection is critical and complex in the development phase, but there are also many operational insights that are essential to enable the storage asset to manage volatility and mitigation strategies. address what it was built for.
Just as renewable generation forecasts need performance predictability, storage asset owners need insight into energy and power capacity relative to installed capacity and guaranteed capacity to make optimal decisions. Warranties, LDs and insurance policies can be financial instruments to cover costs associated with underperformance, such as increased degradation or equipment failure, but often lost market revenues or extended downtimes due to supply chain issues exceed what is stipulated in the contracts . Owners and buyers of assets should be mutually incentivized to take an active role in holding operators and sellers to high standards and ensuring systems perform at the highest level.
Containment is a unique problem for wind and solar owners because there are many triggers and potential solutions at the grid or system operator level. This is partly why you see sustainable developers advocating, investing in and even building for specific projects to increase transmission-related solutions so renewable energy can flow unloaded from where there is space and resources to the charging centers. Balancing authority-type dispatch modeling improvements that can help reduce constraints are often centered around visibility, manageability, and predictability of intermittent resources.
Asset-level predictability and the use of storage in hybrid configurations to increase shipability are assets that exist at the asset-level to ensure sustainable projects remain profitable as we strive for a 100% carbon-free electricity system.
Clara Midgley is the product manager for energy storage and optimization at SparkCognition.