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Irreverent Observations About the Nature of Keeping the Lights On

James Kirby 47

Retired Senior Manager Investment Planning, OPG Ontario Power Generation

Functional experience - New Technology, Models, Engineering Economic Assessment, risk management, Monte Carlo Assessments, Interconnections (purchases and Sales Forecast, reserve value)...

Member since 2020
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Sep 24, 2021Sep 24, 2021 5:23 pm GMT
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Random thoughts on reliability.

The Reliability of electricity supply is an important variable to customers and society in general. It may be important, but it is difficult to estimate. A degree of conservatism is called for in the calculations.

Irreverent Observations About the Nature of Keeping the Lights On

Random thoughts on reliability. The Reliability of electricity supply is an important variable to customers and society in general. It may be important...

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Matt Chester on Sep 24, 2021

Thanks for sharing your thoughts, James-- do you think market mechanisms are going to need to come into play to provide price points for reliability? Something that will advantage non-intermittent sources?

James Kirby on Sep 24, 2021

Most nonfossil fuel sources have low or nonexistent marginal costs. As we move towards net-zero, if we do, there will be more and more of this on the margin and praises will get competed down towards zero. A market structure based solely on the spot market cannot work. That leaves the capacity market. Absent subsidies, many, if not most investors will not enter the capacity market without some kind of longer-term price assurance. This could be built into the capacity market, but it is not necessarily the case that it will be. The markets have been designed by operators and for operators and do not take longer-term nature of investment into account. This has to change. Otherwise, generation which is perfectly viable and needed will leave the market because if there's going to be no money there's going to be no generation. That is a reality. We are already faced with the situation regarding nuclear and gas-fired generation and when the subsidies end even the renewable generation will be at risk. So, yes, I think that there will be something that will provide those price points that you talked about. There has to be.

James Kirby on Sep 25, 2021

To expand a bit on the above you have to wonder what a spot market on the system consisting only of generation with zero marginal running costs would accomplish. When fossil fuels were dominant and there was a mix of generation types the bidding to run meant something. The price we get competed down towards the generation with the highest running costs which were nonzero and able to make some contribution towards fixed costs, including capital costs for options with a high capital cost a little running cost. If we target significant reductions in fossil energy, up to and including net zero, we will have to curtail the output of nonfossil plans more and more. This is already happening in California with solar energy plants taking this most of the curtailments. When this generation is curtailed what sets the price? The pendulum has swung from operating to capital costs and other fixed costs. How will always be recovered. It is the way recovery debits too volatile it will hinder investment and reinvestment in capital-intensive facilities. It is quite obvious that a new mechanism is needed. I even wonder whether this bombardment would have any utility whatsoever under these circumstances. The design of the forward capacity market has to reflect the need for non-intermittent sources.

Matt Chester on Sep 27, 2021

To expand a bit on the above you have to wonder what a spot market on the system consisting only of generation with zero marginal running costs would accomplish.

Great point, and your whole comment is well received. These are the questions that really highlight why tight regulation and oversight is so crucial to the energy markets compared with other industries and even other types of utilities

James Kirby on Oct 1, 2021

Thank you, Matt,

We are entering a future where long term storage of electricity, I emphasize long term meaning seasonal, will no longer be available to was except perhaps in hydraulic. Gas pipelines store energy in salt domes and aquifers. Coal is stored on the pile. In my opinion at least batteries can come nowhere close to that. Except through maintenance schedules and overtime on repair work we previously had no correlation between the generation and the load. Let's take nuclear out of the picture for the moment, as many people want to do. We have already seen examples of systemwide shortages of energy in Europe, when the wind in the North Sea was well below normal levels for weeks and in California where Lake Mead is at the point where the capacity is down for years because of the decrease in the hydraulic capacity with the head. There have been 2 previous occasions wearing the elevation was down, but not by as much as the current decrease. There are 2 intakes for power generation at something like 70 feet lower than the current level and elevation was still dropping..

If we target for net zero with only intermittent generation and battery backup I believe that we will see challenges to the reliability of supply that are outside the realm of experience. And with climate change the data we have collected on historical production may or may not be valid in the future. The regulators, and the utility reliability experts, have a challenging time ahead of them.

Audra Drazga on Sep 29, 2021

James - welcome to the community and thanks for sharing. I look forward to seeing you in the community on a regular basis!

James Kirby on Oct 1, 2021

Thanks you Audra.

Jim Stack on Sep 29, 2021

As more customers have solar and battery storage it should be much easier for the GRID. Micro GRIDs also make it easier. With large battery storage on the GRID it balances itself every nano second.

Thank James for the Post!

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