Disclaimer: The views and analyses represented in the document are excerpts from a detailed report prepared by Mercados Energy Markets India Pvt.

Transcription

1 Integrating Variable Renewable Energy with the Grid An Approach Excerpts

2 Disclaimer: The views and analyses represented in the document are excerpts from a detailed report prepared by Mercados Energy Markets India Pvt. Ltd. (AF Mercados EMI) supported by Shakti Sustainable Energy Foundation (Shakti). The views and analyses represented in the document do not necessarily reflect that of Shakti and Shakti accepts no liability for the content of this document. Further, Shakti and AF Mercados EMI do not accept any liability for the consequences of any actions taken on the basis of the information provided.

3 Integrating Variable Renewable Energy with the Grid An Approach Excerpts from a report supported by Shakti Sustainable Energy Foundation and prepared by Mercados Energy Markets India Pvt. Ltd. March 2013

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5 Table of Contents 1. Background: India's Energy Realities 1 2. The Challenge: Integrating Variable Renewable Energy (VRE) Efficiently Short Term Issues Long Term Issues 6 3. The Solutions: Smart Imperatives for Integrating VRE with the Grid 7 4. Implementation Roadmap 16

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7 1. Background: India's Energy Realities India's substantial and sustained economic growth is placing enormous demand on all of its resources and demand for electricity has been growing on a fast rate, and consequent deficits in supply. In addition to pervasive shortages, about 40% of the population does not yet have access. Excessive dependence on fossil fuels and limited domestic availability has resulted in close to 30 GW of stranded generation capacity. Further, increasing reliance on fuel imports has led to a severely adverse Balance of Payment situation that has contributed to a steep fall in the value of the rupee. India continues to experience power deficit in terms of energy and peak demand requirements which leads to indiscriminate load shedding or over drawl from the grid, causing instability and security concerns. Figure 1: All India Peak and Energy Deficit Increasing demand for electricity and supply deficit also has commercial implications and contributes to the rising price of electricity. The condition is particularly severe in the Southern Region (SR) which is impacted by transmission congestion. While the average price in the rest of the country was Rs per kwh during and Rs per kwh in , the price in the Southern Region was Rs per kwh and Rs per kwh respectively. Figure 2: Average RTC Prices in Southern Grid in The situation further gets exacerbated in the Southern Region grid during the non wind months wherein due to low wind generation the prices in the Southern Grid become exorbitantly high. As is indicated from Figure 2, the average price for Southern Grid during March 2011 (low wind) was Rs per unit whereas in July 2011 (high wind), it was Rs per unit. Thus, renewable generation could and shall play a critical role in Figure 2: Average RTC Prices in Southern Grid in determining electricity prices in short term day ahead electricity markets. The potential impact of renewable power production in reduction of electricity prices, ability to reduce interregional congestion and improve availability of energy has led to an increasing interest in and deployment of large scale renewable energy. 1 Prices indicated here are for the S1 region of the Southern Grid comprising Tamil Nadu and Andhra Pradesh. Prices in the rest of the Southern Grid are typically in close alignment with S1 prices. 1

8 2. The Challenge: Integrating Variable Renewable Energy Efficiently Variable Renewable Energy (VRE) resources like wind and solar present enormous opportunities to meet India's energy deficits in a cost effective manner, but also present very significant challenges on account of their intermittency, making load and grid management complex. Such intermittency emanates from two main aspects variability and unpredictability. Variability of VRE can be addressed through long term developments in storage, balancing and spinning reserves and also by making demand more responsive through price signals. Simultaneously, the challenge is to make the renewable energy more predictable, thus significantly offsetting the impact of intermittency. This means that better forecasting is required in order to allow system operators to schedule or plan how the energy can be used to help match the demand profile and also plan for any system support in the form of ancillary services. Robust processes for forecasting, scheduling and dispatch can help efficiently manage the physical operations of the grid and also financial settlement processes, including through the Renewable Energy Certificates (REC) route. This report bases its principal conclusions on the analysis of experiences in Tamil Nadu (one of the Southern states of India) and in the Southern Grid in India. Figure 3 below provides an illustration of variability of wind generation in Tamil Nadu between months, and also between consecutive days in the same month. Figure 3: Wind Generation in Tamil Nadu during 2011 In supply strapped power systems such as India, variability of supply as well as demand is often managed through load shedding, but this cannot be a sustainable long term solution. In any event, shedding load has its limits and leads to adverse economic impact, both direct (use of inefficient and high cost back up generation and storage) and indirect (severe loss of productivity). The impact of integration of VRE on the power system can be categorised in short term and longterm effects. The short term effects are due to balancing the system at the operational time scale (minutes to hours). The long term effects are related to the contribution VRE can make to the adequacy of the system, which is its capability to meet peak load situations with high reliability. 2

9 2.1 Short Term Issues Figure 4 below indicates the decisions that the system operator is required to take in managing the system effectively. Figure 4: Challenges faced by System Operator in context of grid integration of RES close to real time Voltage Management (Minutes) Production from Gas and Hydro Resources (1-24 Hours) Discarded Wind (not accepted into the grid) Local Impact Regulating Reserves (Minutes to Hours) Transmission and Distribution Efficiency (1-24 Hours) System Impact System Impact Local / System Impact The following sections briefly discuss the operational challenges faced by the system operator in managing integration of VRE with the grid. A. Voltage Management In most of the Indian states, wind farms/generators are connected at the STU level (at 110/132 kv) or at the distribution level (below 66 kv). Heavy reactive power drawls by these generators, pose serious voltage management issues, the impact of which is also felt over long electrical distances. The RE generation varies with the resource availability. This directly affects other generators that have been connected to the system elsewhere, with the aim of providing balancing and operating reserve. Unless the variation is balanced quickly, the voltages on the system vary. In cases when the variations are large, limits may also be infringed. This affects the reliability and stability of the power system. B. Real Power Imbalance Real time balancing of demand and supply to keep the power system stable and hence secure is one of the primary responsibilities of the system operator. While uncertainty in demand always poses a challenge, system operators world wide rely on spinning reserves or other real power support services which trigger into operation within seconds of receiving command from the system operator. Support of such services however needs to be procured in advance. When demand cycles through the day, the system operators have a reasonable estimation of supply requirements and keep such generators ready for operation during the day. However, more than 2 Most of the wind generator systems currently used in India are induction generators. Squirrel Cage Induction Generators (fixed speed) are known to absorb heavy reactive power during start up and also during normal operation. Wind generators, during normal operation, may start up many times. The situation gets exacerbated during events of fault, when these machines consume large amounts of reactive power from the system. This may make recovery from the fault much harder. Solar projects can present similar voltage management problems due to the nature of output from the solar farm consequent to rapid insolation changes.and Andhra Pradesh. Prices in the rest of the Southern Grid are typically in close alignment with S1 prices. 3

10 variability, predictability of wind with manageable accuracy is a greater challenge than predicting and managing uncertainty in demand or supply from conventional resources. For a system operator, extent of predictability is of great importance for reliable and secure system operation whereby it is able to predict and thereby procure adequate balancing capacities. It is important to note that size of the power system impacts management of variability. As the system size becomes smaller, the extent of variation also increases. Because the output fluctuates in a way that generators cannot control, there is a need for additional energy to balance supply and demand on the grid on an instantaneous basis, as well as ancillary services such as frequency regulation and voltage support. The smaller the power system, more is the need for such balancing resources that can respond within a short time. C. Commercial Impediments To Real Power Balancing Real power balancing is a problem for the system operator under two conditions: (a) when there is an excess (above schedule) VRE generation; (b) when the VRE generation reduces below schedule. When VRE Generation Increases: Problem of Discarded Wind in Tamil Nadu The host utility where the wind generator is located has no incentive to continue allowing the wind generator to generate if the Unscheduled Interchange prices are below the Feed in Tariff (FiT). Thus, there could be instances where the wind generator could be instructed to reduce/stop generation even when the frequency is below 50 Hz, let alone instances when the frequency exceeds 50 Hz. As frequency increases and if at the same time wind generation also increases, the utility is faced with an operational decision which is modulated by financial considerations. When the frequency starts increasing but is still below 50.2 Hz and the UI rates are lower than FiT rates / contract rates, then SLDCs may be inclined to back down wind generators, since unscheduled drawal from the grid is commercially more advantageous. Current UI rules encourage such deviant behaviour. When VRE Generation Declines When the wind generation declines and there is fall in grid frequency, the system operator can, in the absence of balancing reserves in its control area, either continue to allow grid indiscipline and overdrawal at high UI rates or shed load both costs to the consumers in the state. The UI mechanism, with all its advantages, is also proving to be detrimental to co operation between state utilities for offering help in balancing energy in such conditions. D. Sub optimal Coping Strategies At the State Load Despatch Centre (SLDC) level, the sudden reduction in VRE based generation can be balanced by ramping up existing thermal and hydro resources if available as spinning reserves (secondary reserves) or by procuring power in the short term markets. Figure 5.1: Wind Generation at TN SLDC Similarly, thermal / hydro generators have to be ramped down when there is sudden ingress of VRE based generation. In general, a number of states have limited options with them to cope with such 3 The real time energy prices in the Inter State Transmission System (ISTS) network are determined through an imbalance mechanism where the energy prices are regulated and are linked to grid frequency. These are referred to as the Unscheduled Interchange (UI) prices. 4

11 situations. The case in point is Tamil Nadu where thermal resources are designed to serve constant base loads; the SLDC is left with rather limited options to balance load and generation. These options include: (i) Ramping of tertiary reserves such as Kadamparai Pumped Hydro Power Plants; (ii) Load Shedding; and (iii) Heavy UI Drawals. The above behavioural phenomenon is depicted through Figures 5.1 to 5.3. A comparison of actual v/s schedule drawal on 17 August and 18 August (Refer Figure 6) indicates that probably, guided by the actual drawal on 17 August, TN SLDC scheduled a higher drawal on 18 August. However, because of high wind generation on 18 August, TN ended up drawing much less than its schedule. This has commercial implications as well Tamil Nadu had to pay for the scheduled energy but got reimbursed at a much lower rate for under drawal (under the current UI mechanism, based on the extent of under drawal). Figure 5.2: Geneneration by Kadamparai Hydro Power Plant Kadamparai generates more during 1 13 hours, reduces generation post 13 hrs. Generation picks up on 18/08/2011 when wind generation is lower than it was on 17/08/2012 Figure 5.3: Load Shedding Profile Lower wind generation on 17/08/2011 is made up through load shedding Figure 6: Schedule Vs Actual Drawal of TNEB for and The following inferences can be drawn from the above: Procurement of power from tertiary reserves or from short term markets, loss of quality of supply due to load shedding or UI drawls (which also compromise grid security) all result in high costs that have to be borne by the consumers in the host state. Sudden ingress or withdrawal of VRE generation from the grid would require tertiary resources with quick ramp rates for balancing. In the above examples, it can be seen that generation from pumped hydro is one such source with UI being the other. Sudden loss of VRE can be made up by increasing withdrawal from the grid. The UI mechanism thus provides perverse incentives for grid integration of VRE based generation, and hence needs to be replaced by a more formal Ancillary Services Mechanism/Market. 5

12 Beyond the above costs, the cycling of thermal generators may also impose huge costs on the state generators, especially when VRE penetration increases which ultimately is borne by the state consumers. Here again, two broad types of costs are involved (a) variable costs due to efficiency loss and (b) increase in life cycle costs due to increased wear and tear. 2.2 Long term Issues A. Transmission Capacity Expansion Integration of VRE generation in the grid requires balancing reserves that ideally should be able to replace VRE generation when the latter reduces and should have the ability to reduce generation at a rate which matches ingress of VRE based generation. This requires investment in transmission capacity (especially because VRE are location dependent and may be far from load centres), reactive power resources to support the flow of power over long lines and reactive power resources to support inductive power requirements of wind generators. While transmission capacity is required to balance the variations in active power output, reactive power resources are required more locally to prevent excessive losses in the grid. The Grid collapses in July 2012 while not at all linked or attributed to VRE highlighted the vulnerability of the inter state network to external events/disturbances. The intra state network is relatively weak, and requires strengthening and augmentation. The augmentation plans need to specifically be looked from the perspective of integration large scale VRE as well. B. Generation Planning With increasing incorporation of VRE into the system, the generation planning will also require a modified approach. Planning only for requisite MW capacity may not be sufficient for system adequacy, stability and security, if such generation is not flexible to respond to system variability. The above calls for incorporation of adequate flexibility in the system as one of the planning criteria besides the MW capacity required in the system. 6

13 3. The Solutions: Smart Imperatives for Integrating VRE with the grid Figure 7: Smoothening effect of FACTS devices India's advantage is in learning from global research and development, which is already happening in VRE heavy power systems, but aligning them to the Indian structure and realities. The Indian power system has several advantages, including a large, frequency integrated grid (Southern Grid is to be integrated with the rest in the foreseeable future), a tiered management system and also a strong inter state transmission backbone. The measures proposed for India need to derive advantages from this structure. 3.1 Voltage Management Figure 7: Smoothening effect of FACTS devicesglobally transmission voltage is controlled through a combination of generator excitation systems, transformer tap changers, static reactive devices and increasingly, Flexible Alternating Current Transmission System (FACTS) devices. FACTS devices combine modern power electronics and control techniques with capacitors, inductors and transformers. In the Indian context the most important FACTS device would be Static Var Compensators (SVC)/ STATCOM. The characteristics of VRE would require voltage stabilisation too rapid for transformer tap changers and too large for many generator excitation systems leaving FACTS as one of the most suitable option. Figure 7 indicates the smoothing effect of FACTS devices. In order to encourage investment in such devices there needs to be a mechanism for determination and sharing of the costs of voltage and reactive power management. Most modern wind turbines have a voltage or fault ride through facility which improves output. However, regulations and the grid code would need to be amended to enforce the same for existing wind farms as well. The existing IEEE Application Guide for IEEE Std 1547, IEEE Standard for Interconnecting Distributed Resources with Electric Power Systems could be adapted for India. Currently older and less efficient wind turbine generators are considering repowering their turbines in order to improve efficiency and plant load factor. Repowering should be considered as a new installation and function as per grid interconnection standards which require features such as variable speed, full scale frequency converter, Low Voltage Ride Through (LVRT), reactive power and voltage control. Regarding recovering the cost of SVCs/STATCOMs and the procurement of reactive power, a state level reactive power pricing mechanism will need to be developed. Since states like Tamil Nadu with an abundance of VRE potential would be generating to support other states in meeting their Renewable Purchase Obligations (RPOs), the costs of procurement of reactive power would have to be accounted for through various mechanisms such as recovery through inter state assets and the point of connection costs or ancillary services which are discussed below. 7

14 3.2 Integrated Generation And Transmission Planning Integration of VRE requires system balancing reserves and network management resources. This requires investment in flexible generation, transmission capacity and reactive power resources to support the flow of power over long lines and to support the inductive power requirements of VRE generators in an optimized manner. While transmission capacity is required to balance the variations in active power output of wind turbines, reactive power resources are required more locally to prevent excessive losses in the grid. Generation capacity expansion planning in India is done by Central Electricity Authority (CEA) and presented in the National Electricity Plan. The models are based on demand data as per the Electric Power Survey. A load duration curve for all India is utilized to plan base load, intermediate and peak load capacities. RE based capacities are treated as must run. The National Electricity Plan elaborates the need for peak capacity and also highlights the characteristics of the same as: (i) Fast start up & shut down times; (ii) Fast ramp up rate; (iii) Wide load range; (iv) Black start capability; (v) Unrestricted up/down times; (vi) Fuel flexibility; and (vii) Low emissions. With increasing VRE penetration, the power system planning needs to adequately consider extreme VRE conditions, including localised high VRE generation in low demand conditions, low VRE generation in high demand conditions and rapid changes in net load. Transmission system planning in India, as stated in the National Electricity Policy, is not based on an explicit consideration of VRE capacities. Even as these issues have progressively come into the fore, (a separate Green Corridor report has been prepared by Power Grid Corporation of India Limited), they need to be integrated fully into CEA's perspective plans. There is therefore a need for explicit consideration of RE capacity in the integrated transmission and generation capacity expansion plan. Further, the models which explicitly model transmission systems and conventional capacities required to balance variability in RE generation need to be adopted by CEA. 3.3 Larger Geographical Control Area To Help Manage Variability India's power system is concurrently managed by a large number of system operators. Active management of demand as well as almost all VRE resources happen through the SLDCs. A sudden reduction in VRE generation can be managed by the SLDC by ramping up existing thermal and hydro resources (spinning reserves) if available or by procuring power in the short term markets. Similarly a sudden increase in VRE generation would require the same thermal and hydro generators to back down. However in a state like Tamil Nadu, where all thermal resources are designed to serve constant base load only, the SLDC is left with limited options to balance load and supply, such as ramping tertiary reserves such as the pumped hydro plant at Kadamparai in Tamil Nadu, overdrawl and the UI penalty or load shedding. Global experience has shown that a larger control areas presents better opportunities for balancing the loss or gain of VRE resources. For example, whilst there may be a lack of flexible gas fired or hydro generation or even energy storage within Tamil Nadu, these resources may be available in the neighbouring state of Andhra Pradesh. However, several technical and commercial factors impede the utilisation of such resources. 8

15 Our analysis indicates that the cost of balancing can be considerably reduced when carried out over the entire Southern Regional grid rather than just over the Tamil Nadu network. The three case scenarios considered in this regard are: Case 1: 100% of the capacity required to provide positive balancing energy is procured through capacities committed to provide balancing services. These facilities remain available on standby until required by the system operator. Such services are normally procured through Ancillary Services Markets. Case 2: 50% of the capacity required to provide positive balancing energy is procured through the Ancillary Services Market and 50% from the intra day/day ahead energy market Case 3: 100% of the capacity required to provide positive balancing energy is procured through the intra day/day ahead energy market The results of the above analysis are indicated in Table 1. Table 1: Penetration levels, balancing capacity and associated costs Maximum Volatility of VRE generation (High wind season) Tamil Nadu Southern Region % Penetration Balancing Capacity (MW) Case 1 Balancing cost (Rs/kWh) % Penetration Case 2 Case 3 Balancing Capacity (MW) Case 1 Balancing cost (Rs/kWh) Case 2 Case % % % % % 1, % 1, % 2, % 2, The following observations can be drawn from the table above: With an increase in VRE penetration, the balancing costs increase and the balancing capacity requirement increases With a larger control area, the balancing costs decline and the balancing capacity requirements also decrease Procurement of balancing services across state borders present differing policy implications. In more mature markets with low levels of VRE, balancing services are generally only necessary for unplanned events such as power plant outages. Generally the amount of reserve capacity contracted is large compared to the small amount of actual electricity required. Balancing services are usually either provided nationally, or in the case of Germany as the responsibility of the four regional Transmission System Operators (TSOs). Currently in India balancing services are not provided by the system operator. Grid connected entities such as state distribution companies and generators are required to remain committed to their schedules or pay UI charges for any deviation. At this time the UI mechanism provides a commercial process for balancing. 9

16 Globally, the recent wide scale deployment of VRE has prompted additional demand for reserve and fast response operations. This need has arisen predominantly due to inadequate levels of accuracy in day ahead forecasts for VRE. It has also led to the need for redesign of the power markets and led to the introduction of robust capacity and ancillary services markets. If VRE has to be integrated on a large scale, such re design (along with incentives for the resources capable of providing such services) is essential and needs to be accelerated. 3.4 System Operation Redesign Keeping in view the increasing deployment of VRE in the country, a paradigm shift is needed in the operations of the system operator (SO). There is a need to introduce greater cooperation between SOs for RE, and integration of SO operations for RE corresponding to the definition of balancing areas. Our analysis indicates a very different set of emergent priorities between the National Load Despatch Centre (NLDC) and the SLDCs, as is depicted below. Table 2: Differing priorities of System Operators NLDC Tamil Nadu (SLDC) Gujarat (SLDC) Factor Rank Rank Rank Transmission Augmentation Transmission standards of performance (particularly at STU level) Designated Balancing Power Larger balancing areas Centralised forecasting Project level forecasting and scheduling of VRE Tamil Factor NLDC Nadu (SLDC) Gujarat (SLDC) Demand Response Operator awareness of situation (rapid updates) Ancillary Services Markets Standard and uniform Grid Codes/Connectivity De nition Integration in operator decisions More flexible power markets

17 As is noteworthy from the table above that there is divergence of priorities between NLDC and the SLDCs. While NLDC's focus combines market design and operations aspects, the SLDCs focus more on the operations aspects. However, operator awareness was given the highest priority and transmission augmentation is given the least priority by all categories. In future, for large scale integration of VRE, the priorities must be reasonably aligned. This would imply that the rules of engagement and also the incentives must have common threads. This will require both commercial alignment as well as a common chain of control that focuses on VRE. This could call for separate Renewable Energy Management & Control Centres (RMCs) to be instituted. Such control centres would typically command a larger control area as compared to the present mechanisms of state focused controls for VRE. 3.5 Overcoming Commercial Obstacles To Real time Power System Management A. Addressing The Unpredictability Of VRE: Need For Forecasting And Planning Many of the challenges related to integrating VRE can be addressed through better forecasting thus providing improved visibility of output and a market design that addresses the unique characteristics of VRE. Forecasts have two main purposes: scheduling to encourage efficient competition in the wholesale market and security scheduling, ensuring that sufficient generation capacity will be available in real time to meet demand. Accurate forecasting will allow less conservative operating strategies to be adopted and the economic benefits will easily outweigh any costs. The challenges at this time to better forecasting are more commercial than technical, arising out of the way the VRE resources have been built and managed in the legacy power system. A framework for forecasting and planning in India should be based on the following principles: 1. Ability to develop accurate real time production forecasts for any generator strongly correlates to the availability of site specific and precise real time data. 2. RLDC/SLDCs must obtain accurate forecasts of RE production to maintain reliable and efficient system operation. 3. Commercially responsive forecasting must be carried out at sub station level by scheduling coordinated or aggregated RE. 4. Centralised forecasting must be done by the system operator also. 5. Forecasting charges availed by the RLDC/SLDC, would be payable by all the VRE generators. Figure 8: Improvement in wing forecasting in the Spanish electricity markets It may be necessary to combine centralized (by the SO) and decentralised (by wind farm operators or their agents) forecasts. Decentralised forecasts will need to be paid for individually by the generators and recovered from green power benefits. For centralised forecasts the cost will need to be recovered through the RLDC/SLDC charge but levied only on the VRE resources. 11

18 International experience demonstrates that over time it is indeed possible to reduce the forecasting errors within very acceptable levels. A third party arrangement has emerged in the Spanish market where specialised forecasting and aggregating services have evolved to bring about better predictability. Over time, this has brought down the forecasting errors as shown in Figure 8. This has also been demonstrated in the Indian market by entities working in the area of wind forecasting. Alternatively, since decentralised and centralised forecasts play a pivotal role in grid integration of VRE and benefit society as a whole, mechanisms for centrally procuring forecasts could be defined. The cost in such case can be recovered as SLDC/RLDC charges. B. Improving Visibility Of Resources: Data Collection And Procurement Enhanced forecasting can be achieved only through better system visibility. The need for centralized procurement of ancillary services for supporting VRE generation has already been emphasised earlier in this report. RLDCs are best placed to coordinate such ancillary services in coordination with the SLDCs. Therefore, there is a need for framing guidelines for improving visibility, data collection and procurement. These guidelines should cover following aspects: 1. Physical site data 2. Meteorological and Production Data 3. Communication, Metering and IT infrastructure requirements 4. Frequency of data transmission 5. Data Security Information disclosure requirements by VRE resources need to be included in the Grid Codes and commercial contracts to allow for better information availability and consequently better awareness on part of the SO. C. Scheduling Mechanism Day Ahead And Intra Day A close to real time mechanism for scheduling already exists as the IEGC permits 8 schedule revisions per day at 3 hrs notice and this offers an opportunity for wind generators to correct themselves, as is shown in Figure 9. Figure 9: Scheduling Mechanism

19 However, from the system operation perspective, the system operator needs to plan for capacity to support the variability of VRE resources. Close to real time management required for such situations requires a well functioning ancillary services mechanism/market or a demand response program. For the ancillary services market to provide the functionality required, it is essential that VRE resources schedule their output accurately. Hence, VRE generators must be responsible for their schedules albeit with some relaxation due to the intermittent nature of their resources. D. Energy Accounting Mechanisms For Imbalance There are two types of costs that would need to be shared. These are the fixed costs associated to capital expenditure and variable costs associated to balancing and system losses. Fixed costs should be approved by Central Electricity Regulatory Commission (CERC) and recovered through the Point of Connection (PoC) mechanism. Similarly costs associated to losses could be as per the PoC mechanism. Once the market for ancillary services is established, the cost of cycling would be reflected within the bid price of resources providing these services. At this time, CERC has attempted to manage the cost of variability through the Renewable Regulatory Fund (RRF). This mechanism has been modified to address various issues raised by the grid constituents. However, a universally acceptable solution on sharing of the integration costs is still elusive. As the penetration of VRE increases, (sometimes in unpredictable ways and places) the new challenges continue to emerge. International experience indicates that with the increased level of penetration of VRE, it has become imperative to treat them at par with other resources in terms of systems operations and market operations costs and processes, but with some important exceptions. Firstly, to the extent possible, greater scheduling flexibility is permitted to VRE (this is also the case in India). Secondly, they are provided with an incentive (or uplift) to manage the costs of deviations from schedules. Subject to these specific exceptions, the VRE resources operate under the same set of market rules as conventional power. This allows for smooth operations of the market and the power system and encourages innovation and commercial discipline. With increase in VRE penetration, it will be important for India to consider such explicit commercial rules instead of overly socializing the costs, as is being currently envisaged. E. Provision Of Flexibility In The System Demand Response And Energy Storage As stated above, some RE sources being variable in nature, there is a need for the system to have adequate level of flexibility to support the need for balancing power. Flexibility in the system can be achieved on the demand side through Demand Response and on the supply side through Energy Storage (can also act from the load side depending on the application). 13

20 Table 3: Applications to provide Flexibility in the System Application 5 Demand Response Energy Storage Description The Utilities in India usually resort to load shedding and UI drawals to manage real time imbalances of power. Alternatively, some states also purchase costly power in the short term markets to manage these imbalances. Such imbalance mitigation measures can be effectively managed through a robust DR program. In states like Tamil Nadu, Rajasthan, Gujarat etc, which are witnessing fast paced utilization of their Renewable Energy Potential (especially wind and solar), DR Programs can be effectively utilized to manage the variability in generation from such renewable sources of generation. Therefore, DR programs can be utilized by the distribution utilities to manage the power systems in short term and also obviate the need for purchase of costly short term power. Energy storage owing to its multiple uses and configuration can support VRE integration in variety of ways. These include, load following and load leveling, balancing uncertainty through provision of reserves, smoothening generation output from plants, matching generation to loads through time shifting etc. Table 5 summarizes the key recommendations made in this report. 5 DR is a consumer's ability to alter electricity consumption at their location when prices are high or the reliability of the grid is threatened. DR has the ability to provide support in short term power management that involves balancing real and reactive power generation and demand in real time. 14

21 15 Table 5: Summary of proposed interventions to support efficient VRE Integration

22 4. Implementation Road Map The solutions stated above present a large and complex agenda. Large scale RE integration is also unlikely unless the issues are addressed comprehensively. Basis the discussion presented in this report, the proposed road map is presented in Table 6. Better integration and management of VRE will be contentious. As penetration increases, the magnitude of issues will increase. The solutions must proceed hand in hand to ensure that generation and transmission infrastructure creation is well co ordinated. Most components of the nine high power transmission corridors being developed in the ISTS are expected to commence commercial operation by These physical developments at the inter state level need to be backed up by policy and regulatory action based on robust commercial mechanisms. Table 6: Proposed Implementation Road Map 16

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24 About the study The study has been supported by Shakti Sustainable Energy Foundation and carried out by Mercados Energy Markets India Pvt. Ltd ( About Shakti Sustainable Energy Foundation Shakti Sustainable Energy Foundation works to secure the future of clean energy in India by supporting the design and implementation of policies that promote both the efficient use of existing resources as well as the development of new and cleaner alternatives. Shakti's efforts are concentrated in four specific areas: power, energy efficiency, transport, and climate policy. The organization acts as a systems integrator, bringing together stakeholders in strategic ways to enable clean energy policies in these fields. It also belongs to an association of technical and policy experts called the ClimateWorks Network. Being a member of this group further helps Shakti connect the policy space in India to the rich knowledge pool that resides within this network. Shakti Sustainable Energy Foundation The Capital Court 104 B/2 Fourth Floor, Munirka Phase III New Delhi India T F