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New Federal Report Confirms That Organized Markets Facilitate Wind Energy

On May 12, 2008, the U.S. Department of Energy released a report, 20% Wind Energy by 2030: Increasing Wind Energy's Contribution to U.S. Electricity Supply that highlights the benefits of competitive markets for wind development, and also notes the broader benefits of these markets for a reliable and efficient generation portfolio to serve consumers. The Electric Power Supply Association (EPSA), the national organization with which NIPPC is affiliated, provides ?excerpts from the DOE report below:

Open Markets are the Ideal Environment for Increased Wind Generation

"Broad geographical markets and inter-area trading would allow the benefits of geographic dispersion and aggregation of wind plant output to be realized. These benefits have been shown to reduce the variability of wind plant output on a large scale, which makes a market-based approach and trading system all the more worthwhile." (p. 100) "The large wholesale markets enable a more effective exchange of services and compensation for all electricity generators, including wind power generators, helping them compete for larger shares of generation markets." (p. 135)

"Systems became interconnected for a number of reasons, mostly having to do with reliability and economics… operators can call on the most efficient and lowest cost producers available across the combined system and shift production away from more expensive units. This approach ensures that the generation mix used to meet the aggregated system's changing load is always relatively more efficient." (p. 91)

"Experience has shown that using well-functioning hour-ahead and day-ahead markets and expanding access to those markets are effective tools for dealing with wind's variability. A deep, liquid real-time market is the most economical approach to providing the balancing energy required by wind plants with variable outputs." (p. 92) "Numerous parties across a wide geographic area would need to collaborate on developing a common plan instead of individual entities planning in isolation. This approach yields major economies of scale in that all users would benefit by pooling solutions to their needs into a single plan that would be more productive in regional terms than simply summing the needs of individual organizations. FERC's Order No. 890 is a large step toward this regional joint planning approach, but success will depend on collaborative follow-through at the regional level." (p. 98-99)

Balancing Markets Important to Integrating Wind into the Grid

"The market allows energy from all generators across the area to be dispatched based on real-time prices. When wind blows strongly, the real-time price falls, signaling more controllable generators to reduce their output and save costly fuel. Conversely, when wind drops off, real-time prices rise and dispatchable generators increase their output. As an example, the Midwest ISO covers a footprint of 15 states, so there is a deep pool of generators that can ramp up and down in response to wind output." (p. 92-93)

"Wider use of price-responsive demand is expected to boost the competitiveness of wholesale electricity markets, enhance grid reliability, and improve efficiency of resource use. Technology and regulatory options that enable customer energy management are gaining momentum because of increasing support from electricity regulators, regional transmission organizations (RTOs), and retail electricity providers. Several customer-driven energy trends could have a significant impact on wind development."(p. 93)

"The 20% Wind Scenario would be aided by the development of or access to energy spot markets where participants who have an excess or shortfall of power could trade at competitive prices that reflect the marginal cost of balancing load. Such markets were recently implemented in the 15-state Midwest ISO region, the mid- Atlantic PJM region, New York, New England, and the Southwest Power Pool (SPP), showing the feasibility of such reforms. It is certainly possible that other regions could pursue such reforms by 2030." (p. 100)



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