A new buzzword is striking fear and excitement in the hearts and minds of renewable energy developers and transmission providers: ‘integration.’ The term can get stakeholders from all sides of the energy industry shouting across the table. It is also a sign of how far the renewable energy industry has come in making resources such as wind and solar energy a larger part of our domestic energy portfolio. So what does integration mean and how should we in the industry be feeling about it? In the context of renewable energy, ‘integration’ refers to a transmission provider’s use of balancing reserves to accommodate the natural variability of renewable resources.
Balancing reserves are needed for those instances when wind or solar energy projects generate more or less electricity than forecasted. In the case of wind energy, this ‘wind integration’ or ‘wind balancing’ requires the transmission provider to either dispatch energy from its own hydro or thermal resources if the wind blows less than was expected or reduce the output of its hydro or thermal generation if the wind blows more than was expected at the time that the wind generator submitted its energy schedule to the transmission provider. Although ‘integration’ is commonly confused with energy storage and shaping, these are different concepts (and services) with different implications (and charges) for renewable energy developers.
Historically, when the percentage of renewable energy being fed into the grid was relatively small, the variability of renewable energy was masked by the variability of energy demand, and transmission providers did not charge for these balancing services. However, as the percentage of energy generated from renewable resources has increased, so have the number of voices calling for charging renewable energy generators for the ‘costs’ of providing integration or balancing services. To place this issue in context, we offer highlights from the recently concluded Bonneville Power Administration (‘BPA’) rate case, which set BPA’s transmission rates for the 2010-2011 rate period.
Because the Pacific Northwest is at the forefront of the deployment of renewable energy on a large scale, the BPA experience is instructive for renewable energy developers across the country. Currently, BPA has a higher concentration of wind energy on its system than any other balancing authority in the country. BPA forecasts nearly doubling this amount over the next two years. The ratio of wind on BPA’s system has prompted it to literally lead the charge on wind integration pricing.