The Impact of Intermittent Renewable Energy Resources on Power System Reliability

Summary

Transitioning the electric power sector to rely more on wind and solar photovoltaics (WPV) has long been cited as a potential solution to reducing harmful greenhouse gas emissions associated with fossil fuel electricity production. An under-explored implication of this transition, however, is whether increasing the amount of net generation supplied by WPV negatively impacts power system reliability? In this paper, we empirically investigate the preceding question using an unbalanced panel dataset of utility-scale operations between 2013 to 2017. Disruptions in power system reliability are measured by the frequency and duration of power system disruptions experienced by end-consumers. Results suggest net generation from WPV, on average, has a significant positive impact on the length of power system disruptions experienced, but only at low levels of net generation from WPV. As the net generation from WPV increases, the duration of power system disruptions decreases. To provide insight into the policy implications of our results, we forecast disruptions in power system reliability, assuming different renewable energy policy scenarios for states across the United States with active renewable support policies in place. We estimate the economic costs of our forecasted disruptions using an open-source, interruption cost estimate calculator.

Situation

Extreme weather events, including major hurricanes along the eastern and Gulf coasts, freezing weather in the Northeast, and uncontrollable wildfires in the West continue to reveal the potential risks to power system reliability. In addition to mitigating these potential risks, electric power system operators face the ongoing challenge of ensuring the current grid system has adequate infrastructure to keep pace with the increasing penetration of renewable energy resources, including wind and solar photovoltaics (WPV). In response to rapid technological advancement, falling energy prices, and evolving regulatory environments, grid systems powered by WPV have proliferated across the United States (U.S.) over the past decade. While WPV provide an opportunity to reduce greenhouse emissions associated with traditional fossil fuel power generation, their inherent variable nature has raised some questions within the energy policy literature. Perhaps the most important of which are: 1) Does increasing the amount of the net generation supplied by WPV negatively impact power system reliability? and 2) If so, then what are the economic costs associated with decreased reliability of the power system? This paper helps to answer these two interrelated questions by empirically examining whether increasing the amount of utility-scale net generation from WPV influences the frequency or duration of disruptions in power system reliability experienced by end-consumers. For this study, we assume electrical system reliability can be defined as the ability of the electrical grid generating system and its components to provide a consistent, steady, uninterrupted supply of power to end-consumers.

Response

To investigate this relationship, we compiled data from two annual surveys administered by the U.S. Energy Information Administration (EIA). This dataset consists of an unbalanced panel of disruptions experienced by end-use customers and electric utility operational information, including the net generation supplied by WPV between 2013 to 2017. A random-effects model specification was used to estimate the effect of increasing net generation supplied by WPV on the frequency and duration of disruptions in power system reliability experienced by end-consumers. We used an instrumental variables (IV) specification to control for the potential endogeneity between the amount of net generation supplied by WPV and the frequency and duration of disruptions experienced. The IV approach controls for the endogeneity of net generation supplied by WPV, which is affected by a state’s policy support for renewable electricity generation. Commonly used test statistics confirmed the validity of the chosen instruments.

Impact

Empirical results suggest net generation supplied by WPV has had, at the margin, an economically small but statistically significant impact on the duration of disruptions experienced by end-consumers. Based on these findings, we forecast the near-term future costs associated with potential disruptions for states across the United States (U.S.) with current renewable support policies in place. Cost estimates are generated from the Interruption Cost Estimate (ICE) Calculator (Sullivan et al. 2018). Results suggest, as the net capacity supplied by wind and solar increases, the total cost of sustained power system interruptions ranges from $1.5 million U.S. Dollars (USD) to $2.5 trillion USD. The cost per unserved kilowatt-hour of electricity ranges from $29 to $160 USD. Our study is important because the grid system is still in its infancy regarding the shift towards non-centralized generation, yet next to natural gas newly installed electric capacity is projected to come primarily from wind and solar. Furthermore, as generation from renewables increases, early identification of potential vulnerabilities (i.e., extreme weather, insufficient infrastructure) is critical to ensuring grid system failures are minimized. To this note, our study contributes to the literature by providing an early analysis of the vulnerability of the power grid system to disruptions in service reliability resulting from increased net generation from wind and solar. The full costs of increasing the capacity of renewable power sources in the grid, which our results show vary across states and regions, need to be accounted for when assessing the benefits and costs of state and local public policies aimed at increasing power generation from wind and solar. Failure to account for these costs can lead to inefficient policy and management decisions on the part of private utilities, government agencies, and elected officials. Recognition and quantification of these costs may also help utilities to discover new means for improving the grid’s ability to absorb additional renewable capacity, thereby reducing interruption costs. Reducing interruptions costs is a win-win-win for the “triple bottom line” as it will help the profitability of utilities, help to improve the environment, and improve overall social well-being. That is, recognition of these unintended costs can make public policies for promoting renewable energy more attractive from an economic perspective.

State Issue

Sustainability, Conservation, & the Environment

Details

• Year: 2020
• Geographic Scope: National
• County: Clarke
• Location: College Station, Athens
• Program Areas:
  • Agriculture & Natural Resources