Editorial

Best laid plans: IRPs and renewable energy

Questions about IRPs and RFPs speak to a new way of looking at the energy mix

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During a recent panel discussion at Wood Mackenzie’s Power & Renewables Summit, attendees pondered the challenges that grid planners face in the context of increasing renewables penetration.

Panelists focused the conversation on the need to approach integrated resources plans (IRPs) differently as renewables become a greater force in grid planning.

The panelists discussed the inherent challenge of filing IRPs when inputs are in a state of flux. At one point, a leading solar developer on the panel asserted that IRPs often fail to capture accurate information about solar assets.

An IRP is a key document in long-term resource planning, and its structure can guide the conversation around when and how renewables should be integrated into a region’s energy mix.

The role and structure of an IRP, and options to go beyond it, are becoming more relevant as the energy mix evolves away from fossil fuel generation and utilities collaborate with new types of companies at the grid edge. Let’s explore some opinions that panelists shared on grid planning and renewables, and our analyst take on the issues.

Claim: “Solar is the most dispatchable resource on the grid, even more so than fossil fuels.”

A solar industry representative on the panel made this claim, contrasting the level of detail that IRPs tend to capture for solar versus other types of generation and noting that IRPs sometimes understate solar’s potential dispatchability.

Our take: Despite their variability, it’s true that solar (and wind) can be generally thought of as dispatchable resources in the sense that they can be curtailed. Renewable generation can be "dispatched down" by curtailing production, to provide down regulation or reserve services. Renewables can also be "dispatched up" by scheduling it ahead of time (say, day ahead) below the expected supply, and then ramped up when needed to full production if asked to provide up regulation or reserve services.

Curtailing renewable supply can be economic when, for example, the value of ancillary services exceeds the opportunity cost of the curtailed energy.

The question of whether solar/renewables are more dispatchable than fossil fuels depends on context and how the term is being used. It is interesting to note that once a utility commits a thermal asset, it generally must run that asset at least at some minimum percentage of its capacity. Doing so represents a variable, but unavoidable, cost.

So, should the solar industry be concerned that utilities are underestimating solar’s dispatchability in the IRP process? As the dispatchability of solar evolves, we hold the position that more detail on the capabilities on each resource is always better. There are varying degrees of awareness around the full capabilities of renewables on the grid, and utilities must seek to incorporate as much information as possible about all potential generation resources in IRPs.

Claim: “RFPs can be an essential complement to IRPs.”

Power & Renewables Summit panelist from Arizona Pubic Service (APS) noted that it is possible to use the RFP to do things outside the IRP process, such as work out a power purchase agreement for a battery with solar.

Our take: Utilities don't always have the information the need to make accurate models. In areas where renewables are a growing part of the energy mix, several utilities are using RFPs to seek information from the market and renewable energy providers, which can replace IRP models or inform them.

Some utilities are seeking cost information from renewable energy providers using RFPs, enabling the utilities to then judge which combination of resources are optimal.

In Hawaii, the Hawaiian Electric Company (HECO) has developed a new long-term grid planning process that brings distribution, generation, and transmission together and relies on RFPs to inform the planning process itself.

HECO calls the approach a market-based IRP and it goes beyond utility-scale procurement to take distributed energy resources into the grid planning process. (California and New York are taking a different approach here with new processes for the valuation of DERs.)

Xcel Energy’s IRP process also relies on RFPs, using bids submitted by renewable energy providers to inform various grid planning scenarios.

The future of grid planning

On the whole, grid operators have an incentive to ensure that IRPs reflect the full capabilities of renewable resources, and to avoid using flawed IRP inputs.

These questions about IRPs and RFPs speak to a new way of looking at the resource mix, where more market players have a say in traditionally siloed planning processes.

As a panelist from Xcel Energy noted: “The interest of the stakeholder community is much greater now than it used to be  people care more about the resources that serve them.”

 

Join Wood Mackenzie Power & Renewables analysts and GTM for our next event, the upcoming Energy Storage Summit in San Francisco, CA on December 11-12. Agenda and regristration details here.