Market design for system security in low-carbon electricity grids: from the physics to the economics
A technological revolution is underway in most electricity systems around the world. Solar and wind generation technologies offer emission-free energy at close to zero marginal cost. Coupling these technologies with storage and demand response allows for firmer sources of power and improved balance between demand and supply. However, the integration of these technologies into the grid comes with new challenges for maintaining operational security.
Professor Pierluigi Mancarella, lead of the Energy Systems research program at the Melbourne Energy Institute, recently published a paper that analyses the foundations of market design for system security in low-carbon grids. The paper is the result of an important ongoing international collaboration with the Oxford Institute for Energy Studies, and specifically with Farhad Billimoria, Visiting Research Fellow, and Rahmatallah Poudineh, the Electricity Programme’s Director of Research.
Renewable technologies have introduced two major issues of concerns for operational security. First is the variability and uncertainty inherent in resources such as wind and solar, compounded by lack of visibility of distributed energy resources, which make system balancing overall more difficult. The second issue relates to the way renewables interface with the grid – through power electronics. This differ from turbine-based, synchronous generation which have historically supported grid stability via the provision of inertia and fault protection. With the phase-out of synchronous generation, low-carbon grids around the world are therefore experiencing several challenges in maintaining secure operation.
To manage security when critical system services are scarce, operators may need to resort to interventions in the market, renewable curtailment, and potentially delaying new connections to the network. This may eventually slow down the investment in renewables significantly, which is critical to the deep decarbonisation of the electricity and the whole energy sector. On the other hand, new operational practices are being introduced and novel technology solutions developed to better manage security issues. However, without appropriate policy and market frameworks, there will be little incentive for market participants and investors to deploy these advanced functionalities.
The manifold purposes of the paper are to illustrate, in simple terms, the complexity of low-carbon power system operation, discuss the suitability of a ‘bottom-up’ approach that starts from the physics of grid services to define their economic features, and presents a general framework to analyse potential options for efficient procurement of security services. This research comes at an important time in Australia, with different stakeholders and particularly the Energy Security Board progressing important energy market reforms. It can also be regarded as a follow-up of the ground-breaking power system security assessment work that the Melbourne Energy Institute conducted for the ‘Finkel Review’.