POLITICS: PennAve

Keeping the lights on used to be so simple

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PORTLAND, Ore. — Employees at the Iberdrola Renewables National Control Center are monitoring supply and demand curves in the Midwest, keeping an eye on bird migration patterns in south Texas, placing phone calls to electricity marketers out West and checking wind patterns across the country on 16 TV screens. It is a dizzying process that funnels 1.2 million bits of data through this office every four to 10 seconds.

And to think, keeping the lights on used to be so simple.

The nature of the electric grid is changing, and no one knows that better than Iberdrola, a subsidiary of Spanish firm Iberdrola, S.A., that now has renewable energy assets in 19 states. Its business operations vary widely across the country, a reflection of fragmented infrastructure, regional regulatory mechanisms, local policy choices and varying amounts of renewable energy available in different parts of the country.

"That makes this especially challenging for the generation dispatchers because they all have to do it differently," Kit Blair, who manages the control center, tells the Washington Examiner during a walkthrough in mid-May.

That's markedly different from electricity delivery of yesteryear, and more changes are likely afoot. The Environmental Protection Agency is racing to finish a rule by June 1 that would regulate carbon emissions and have far-reaching implications for the future of electricity delivery in the United States. Industry and environmental insiders say one option would be to regulate emissions "outside the fence" -- on a state-by-state basis, for example -- rather than pressing individual smokestacks to run cleaner.

Traditionally, most utilities owned generation, transmission and distribution assets, operating as regulated monopolies with a dedicated customer base and needing regulatory approval to raise rates. Typically, utilities relied on cheap coal-, oil- and natural gas-fired generation to keep prices low.

That began changing in the 1990s as some states deregulated. And in the 2000s, states started passing renewable electricity mandates that, to varying degrees, required getting a percentage of power from clean sources. Today, 30 states have them.

All that, combined with state and federal incentives for wind, solar, biomass and other renewables and falling costs for renewables, created an opening for new power sources. While non-hydropower renewables' share of the nation's electricity supply is still small at 6.2 percent, it's having an outsize effect on how regulators, markets and utilities treat power delivery.

Larger integrated markets, such as the PJM Interconnection in the East and the Midcontinent Independent System Operator in the Midwest, have proved most deft at rolling new electricity generation into their systems.

They hold auctions to set capacity years in advance. For day-to-day operations, suppliers submit their bids into the day-ahead wholesale market and PJM uses the lowest-cost power to meet demand. Suppliers also participate in a real-time market to respond to fluctuations. Such systems can quickly shift power from one area to another to balance loads, which is key for utilizing intermittent sources.

It is easier for Iberdrola to operate in those markets, though there are still complications. As Blair is explaining how the firm operates in PJM, a doorbell-like sound rings.

"That's a curtailment," he says, indicating Iberdrola is producing more wind than it's contracted for and must now cut output. The signals from systems like PJM come every five minutes based on a bid price set by either Iberdrola's utility partners or the firm's 35-person energy trading team across the street. Curtailing is better than being short — Iberdrola takes a hit if it can't meet contracted capacity at high prices because it will need to purchase power from other suppliers to meet obligations.

Many regulated utilities have resisted these trends. They say renewable power is too unpredictable, raises power prices and intermittently makes subsidized wind and solar power cheaper than "baseload" sources.

"Coal and nuclear are very difficult to turn on and off," Steve Corneli, vice president of sustainability strategy and policy with Princeton, N.J.-based NRG Energy, which operates in 46 states, told the Examiner. "Everybody likes renewables. But there's only so much they can fit into a given market in terms of overnight demand."

One way to solve those problems is to build more transmission lines to carry bulk loads of electricity from far-flung distributed generation sites to cities and to shift power around more easily in general, but it's a costly proposition.

The Federal Energy Regulatory Commission has tried to smooth that infrastructure planning through an order that would spread cost allocation across states. The Obama administration also has tried to fast-track a handful of transmission projects, and earlier this month the White House rolled out a plan to cut the time it takes to get a permit for an array of infrastructure projects.

"We just can't do it in isolation anymore," said Kevin Lynch, managing director of external affairs with Iberdrola. "We've been squeezing efficiencies out of the system because of the way markets now work."

The West presents the latest test case.

The wild, wild West is a fitting moniker for the region, where there's no organized market and utilities are small and numerous. The disparity makes organization challenging — there's a lot more verbal communication compared with the automated systems in the East — and grid fragmentation makes absorbing renewable power more difficult.

Iberdrola is participating in a pilot project with Bonneville Power Administration, the government-run utility that supplies the Northwest with one-third of its electricity. Lynch says that others in the region are watching the effort closely.

The project involves Iberdrola running 1.4 gigawatts — enough to power one million homes — of BPA's wind power. The firm's energy traders strike arrangements with other utilities a day ahead of time to meet projected demand.

Iberdrola wants to rely solely on wind to meet demand, but it also can draw from a 100-megawatt, fast-fired natural gas generator and 300 megawatts of hydropower. (1,000 megawatts equals one gigawatt.)

The trick is having enough supply of wind power to stay within a certain deviation of the projected demand. If Iberdrola accrues too many violations for being outside that range, BPA can terminate the contract — pilot project over.

The day before, Iberdrola predicted the 11 a.m. hour for this day would yield 23 megawatts of wind power. But at 9:24 a.m., it's looking like wind will supply just 3 megawatts of power.

That will change, though. Blair is looking gleefully at the projected supply curve for the day — it's getting windier around lunch time, and peak wind will hit around 5 p.m., when power prices are highest and Iberdrola can get the most bang for its megawatt.

"This afternoon will be exciting," he says, eyes still trained on the screen, tracking the 5 p.m. spike. "Which is really good for us."

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