The Importance of Flexible Grid Services in Capacity Markets to Support Reliable Grid Operations

A lot of attention has focused on investments in renewable electric generation, such as wind and solar power generators, largely due to Green Buyer interest in sustainability and State Energy Goals to address GHG emissions in response to Climate Change concerns. These renewable, intermittent resources can indeed provide valuable energy to help balance supply and demand, but they do present some uncertainty and operational challenges to grid operators that strive to maintain a reliable grid. Adding more intermittent resources to an electric grid does not ensure that a system operator will have the resources needed to ensure reliable grid operations, in fact quite the opposite is true, based on empirical data from grids with high penetrations of intermittent resources, i.e., Hawaii, California and Ireland and reporting from NERC.

Ireland’s Grid Operator, EirGrid, was one of the earliest to experience the effects of a high penetration of intermittent resources on grid operational needs and the need to acquire “flexible grid services”, as opposed to “plain old capacity” to maintain grid stability. Energy Central contains several articles, starting in 2019, that highlighted the need for Grid Operators to acquire “essential grid services” instead of “plain old capacity”, which treats every resource equally, in order to address grid operational requirements as penetration of intermittent resources increase.

Fast forward to 2022 and we see this movement to acquire “flexible grid services” capacity reaching critical mass, and momentum is increasing. The Independent Electricity System Operator (IESO) for Ontario, Canada, published a report in April 2022 that describes the need to acquire “flexible grid services” as opposed to “plain old capacity”.  I think of these actions by the IESO as essentially acquiring "retainers for specific grid services" over a specified commitment period, to be provided when needed by the IESO for Operability needs. This article highlights some of my key findings and conclusions from this IESO report.

The IESO established the Resource Adequacy Framework in 2021 to provide a flexible and cost-effective approach for competitively securing the resources necessary to meet demand. The reliable operation of Ontario’s electricity system requires the coordination of many participants providing a variety of services. The IESO procures various electricity services, administers real-time electricity markets, forecasts and plans for future system needs, and recommends the development of transmission infrastructure to ensure that the right amount of electricity is available when and where it is needed. The IESO is transitioning away from resource-targeted procurements, to acquiring the services of resources based on their ability to meet system needs. On January 27, 2022, the IESO received a directive from the Minister of Energy (Minister), providing the IESO with the authority to execute the first medium-term RFP (Medium-Term I RFP), for the procurement of capacity services from existing generation and storage facilities.

Ontario, like many jurisdictions in North America, is experiencing changes in electricity supply and demand, creating new needs. As Ontario embarks on a period of procuring services from existing and incremental resources, acquisitions will be tailored to ensure reliability needs are met. Beyond ensuring Ontario has resources available on peak (capacity) to serve demand, the IESO anticipates additional needs where it will be important to have confidence that resources can deliver energy for a sustained period of time.

Traditional resource adequacy assessments have focused primarily on ensuring adequate capacity to serve peak demand periods. This simplification was satisfactory at a time when electricity fleets across North America included a large amount of dispatchable facilities that were available when needed, no matter the duration of need. The IESO has focused past acquisitions primarily on procuring enough capacity from individual resources to serve peak loads. The availability of supply resources can also impact the time of day when risks emerge. For example, the availability of solar generation varies over the course of the day and is not always in alignment with periods of high demand.

Operability refers to the IESO’s ability to manage a variety of conditions on the power system as they occur in real-time. The IESO works to ensure that the power system is reliable under changing system conditions, variability of supply and fluctuation in load, while respecting thermal, voltage and transient stability limits on the system. Operability is achieved by having a diverse and flexible set of resources with a balance of characteristics that allow the power system to respond to changing conditions. Recognizing that not all facilities in a power system can (or need) to have an entire set of characteristics that contribute to an operable system, the IESO’s approach is structured in order to acquire specific, unbundled services where required.

Resources with one or more of the following attributes help to enhance the operability of the system:

• Flexibility is the ability of the system to respond to intra-hour circumstances or conditions that arise in real-time, depending on the supply and demand balance that materializes
• Ramping capability is the ability of a resource to change its active power output, expressed in MW/minute
• Ancillary service capability is the ability of a resource to provide operating reserve, reactive support and voltage control, regulation or black start capability

The Resource Adequacy Framework sets out a competitive strategy to acquire essential grid services from resources, balancing ratepayer value and supplier risks, while recognizing the unique characteristics and contributions of different resource types. The framework is designed to facilitate the transition to a more transparent and competitive procurement environment that aligns resource acquisitions with evolving system needs. Many emerging technologies have the potential to play a role in future IESO acquisitions. The IESO’s Enabling Resources Program is intended to facilitate the entry of these technologies into the IESO’s energy and ancillary services markets and capacity acquisition mechanisms. Since Ontario’s electricity fleet is comprised of many resources of varying ages and types, the acquisition mechanisms provide opportunities to secure services from existing assets and drive investment in new assets.

In summary, the emerging needs for enhanced operability of the grid, require that the most operable resources are, at minimum, dispatchable. In addition, the procurement design should value those grid service offerings that have one or more of the following technical characteristics:

• The ability to ramp up or down quickly;
• The ability to register as a quick start facility as per the IESO’s Market Rules;
• The ability to provide a wide operating range, especially resources with low minimum loading points; and
• The ability or technical capability to provide one or more ancillary services.

Discussions are now underway in the United States to establish a nationwide “Grid Services Standard" that could help to define each grid service offering in wholesale markets. This standard would uniquely identify each grid service by name and incorporates descriptive characteristics (i.e., performance metrics) that are used to distinguish each grid service and enables the valuation of each service using wholesale market-based mechanisms.