I recently had the opportunity to attend a seminar on the issues facing the current deregulated electricity markets and I would like to share some of my takeaways from that talk.
One important issue is the increasing penetration of wind energy in the grid. If we look at the wind pattern on a 24 hour scale, we realize that the variation from 10 pm in the night to 10 am in the morning is equivalent to the loss of 6 nuclear power plants. Is this expected behavior?
Our forecasts have become better, the 5 minute nodal market is possible partly because of the improvement in telemetry and computational resources available. We have a lot more information. Unfortunately with more wind, we have a lot more uncertainty.
I would like to classify the market issues into two categories, one technological and the other economic/policy issues. The technological ones are the research for the future. These include storage, distributed generation and increased efficiency of renewables to name a few. The economic/policy issues are ones we can handle today, or at least a little faster.
For example, market design (day ahead/real time), reserves formulation(fixed/probabilistic), pricing (deterministic/stochastic) come under the second category. These are important too. They set up the right incentives to motivate technological research in the right direction. Electricity is like no other commodity. Theories will start emerging only after observing the market behavior. I’m curious about how electricity is going to be traded in 100 years time.