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TRANSCRIPT
Imperfect Markets versus Imperfect Regulation
Electricity Infrastructure and
Transmission
Steve Cicala
University of Chicago
June 18, 2016
Steve Cicala June 18, 2016
Imperfect Markets versus Imperfect Regulation
What’s so Hard about Expanding Renewable
Generation?
• Background on Electricity Dispatch
• Institutions that have Shaped the Grid
• Renewable Resources & Non-Dispatchability
• Matching Supply and Demand:
• Across Space (Transmission)• Over Time (Storage)
Steve Cicala Introduction June 18, 2016
Imperfect Markets versus Imperfect Regulation
Outline of Talk
1. Background on Electricity Dispatch
2. Institutions that have Shaped the Grid
3. Renewable Resources and Non-Dispatchability
4. Matching Supply and Demand
Steve Cicala Introduction June 18, 2016
Imperfect Markets versus Imperfect Regulation
Outline
1. Background on Electricity Dispatch
2. Institutions that have Shaped the Grid
3. Renewable Resources and Non-Dispatchability
4. Matching Supply and Demand
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
Demand Fluctuations Over the Week350
400
450
500
GW
h
0 24 48 72 96 120 144 168
Hour of Week
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
Demand Fluctuations Over the Year350
400
450
500
550
GW
h
0 100 200 300 400Day of Year
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
Agile Units for Peak Times: 50MW
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
High Capacity Units for Base Load: 1750MW
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
Cost Minimization: Order Generating Units0
200
400
600
800
$/M
Wh
0 10000 20000 30000Cumulative Nameplate
NEISO 1aug2005 0:00
Steve Cicala Background on Electricity Dispatch June 18, 2016
Imperfect Markets versus Imperfect Regulation
Outline
1. Background on Electricity Dispatch
2. Institutions that have Shaped the Grid
3. Renewable Resources and Non-Dispatchability
4. Matching Supply and Demand
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
Power Control Areas in 1997
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
A Brief History of the Electricity Sector
• Was long believed to be a natural monopoly.
• Grew up as a balkanized patchwork of regulated,vertically integrated utilities.
• Rates were set by State Public Utility Commissions.
• “Prudent” cost recovery ensured regulation ofinvestments and operations.
• Units dispatched based on engineering estimates ofcost within ∼ 100 Power Control Areas.
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
A Brief History of the Electricity Sector
• Federal Energy Regulatory Commission (FERC)begins encouraging competitive generation as part ofbroader deregulatory push in late 1970’s.
• Late 1990s: Independent System Operators (ISO) /Regional Transmission Organizations (RTO) begintaking over dispatch in select areas areas.
• ISO/RTOs consolidate Power Control Areas in to asingle dispatch algorithm.
• Generating units are scheduled according to bids inday-ahead, uniform price auctions instead ofengineering estimates.
• Real-time auctions determine who actually produceselectricity.
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
Balancing Authorities in 1999
NPCC
ERCOT
FRCC
SPP
MAPP
WECC
ECARMAIN
MAAC
SERC
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
Wholesale Electricity Markets in the U.S.
Steve CicalaInstitutions that have Shaped the
Grid June 18, 2016
Imperfect Markets versus Imperfect Regulation
Outline
1. Background on Electricity Dispatch
2. Institutions that have Shaped the Grid
3. Renewable Resources and Non-Dispatchability
4. Matching Supply and Demand
Steve CicalaRenewable Resources and
Non-Dispatchability June 18, 2016
Imperfect Markets versus Imperfect Regulation
Old System: Bring the Fuel to the Generators
Steve CicalaRenewable Resources and
Non-Dispatchability June 18, 2016
Imperfect Markets versus Imperfect Regulation
Steve CicalaRenewable Resources and
Non-Dispatchability June 18, 2016
Imperfect Markets versus Imperfect Regulation
Steve CicalaRenewable Resources and
Non-Dispatchability June 18, 2016
Imperfect Markets versus Imperfect Regulation
Outline
1. Background on Electricity Dispatch
2. Institutions that have Shaped the Grid
3. Renewable Resources and Non-Dispatchability
4. Matching Supply and Demand
Steve Cicala Matching Supply and Demand June 18, 2016
Imperfect Markets versus Imperfect Regulation
Supply is Location-Specific
• Problem 1: No power where people want it
• Wind is in Iowa, We’re in Chicago.• Solution: Transmission
• HVDC• Allow areas to produce more than they consume (i.e.
Wyoming coal)
Steve Cicala Matching Supply and Demand June 18, 2016
Imperfect Markets versus Imperfect Regulation
Supply is Time-Specific
• Problem 2: No power when people want it
• Lots of wind at night.• Solution: Storage
• Hydro Reservoirs (and pumped)• Molten Salt• Batteries• Fly Wheels, etc. etc.• Transmission! (Time Zones, aggregation)
Steve Cicala Matching Supply and Demand June 18, 2016
Imperfect Markets versus Imperfect Regulation
Transmission Constraints
Steve Cicala Matching Supply and Demand June 18, 2016