Balancing Wind Down Ramps With Demand Response: The opportunity for load participation in ancillary service markets spurred by high wind penetration

Abstract

Large “down-ramps,” inherent in the pronounced variability of wind power generation, are a threat to grid stability as the share of wind resources increases in power markets. Balancing Authorities face the challenge of how best to address the externalities that wind variability places on the grid. Our analysis assesses U.S. power markets that offer the greatest opportunities for demand response to act as a wind balancing resource. More specifically, this study evaluates market opportunities for third-party demand response aggregators to bid the capacity of responsive load into ancillary services markets to address these “down-ramp” events. This evaluation was performed through both the establishment of a qualitative framework and the creation of a quantitative, Microsoft Excel-based, model.

In the qualitative framework, we reviewed the existing wind integration literature to identify the critical characteristics of a balancing authority that are predictive of the local grid’s relative capability to accommodate wind ramping behavior. In this framework, we additionally outline key qualities of loads that make them viable candidates for the demand response services required in the balancing of wind ramps. Lastly, we discuss several potential approaches for forecasting future wind penetration in a balancing authority. We have found that demand response for wind balancing can be a favorable emerging business opportunity in a power system at the confluence of these three aforementioned analyses: 1) the balancing authority’s structure and other conditions lead to a limited ability to effectively respond to increasing wind penetration, and demand response is an eligible resource to participate in balancing markets, 2) the balancing authority has a sufficient concentration of load types that are viable and appropriate demand response candidates for the balancing of wind ramps and 3) there are expectations of high future wind penetration in the system.

For our quantitative analysis, we have developed a modeling tool designed to project the total size of the down ramps caused by various wind penetration levels in a given balancing authority. These projected down ramps are then related to the generation assets of the balancing authority to evaluate the efficacy with which wind ramps can be balanced with incumbent generation and to assess additional ancillary services required that could be met with demand response, among other sources.

Finally, the qualitative and quantitative evaluation frameworks we have developed are applied to a case study of the Southwestern Public Service (SPS) balancing authority in the Southwest Power Pool, where there is high wind penetration and an evolving ancillary services market. Ultimately, while we find SPS to be a very strong candidate for demand response-derived wind balancing on a number of metrics, through our quantitative analysis we nevertheless find that an abundance of installed generation capacity in the balancing authority somewhat mitigates the deleterious impact of large wind down ramps, and substantially higher wind penetrations must be achieved before SPS is truly constrained. However, demand response still may provide the least cost option for wind balancing even at lower wind penetrations. There are current policy and market barriers directly precluding load response in ancillary service markets in the Southwest Power Pool, however given policy changes happening at the national and regional levels, it appears this trend may be reversing in the near term.

The tool set we have developed here will allow third-party demand response providers to effectively and relatively quickly assess the relative merits of the business opportunity associated with attempting to sell demand response as a wind-balancing product in a given power system. In addition, the insights provided herein may illuminate several key considerations for a balancing authority seeking to address the efficacy with which wind down ramps can be balanced in future grid operations.