Source: UNIVERSITY OF CALIFORNIA, DAVIS submitted to NRP
THE IMPACT OF INTERMITTENCY ON THE ENVIRONMENTAL BENEFITS OF RENEWABLE ELECTRICITY
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
Reporting Frequency
Annual
Accession No.
1001957
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
(N/A)
Project Start Date
Nov 5, 2013
Project End Date
Sep 30, 2018
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
UNIVERSITY OF CALIFORNIA, DAVIS
410 MRAK HALL
DAVIS,CA 95616-8671
Performing Department
Agricultural and Resource Economics
Non Technical Summary
Motivated by the belief that renewable electricity can provide substantial reductions in air pollution, 29 states have implemented policies mandating sizable increases in renewable generation. Driven by these policies, investment in wind and solar generation capacity has grown rapidly. Electricity generated by wind turbines and solar panels is inherently intermittent. The impact of this intermittency has been the topic of much debate. Critics of the current efforts to expand renewable capacity often claim that intermittent renewable output forces conventional generators to operate inefficiently - eroding the potential fuel cost savings and emissions reductions that renewables could ideally provide. On the other hand, proponents of renewables argue that conventional generation technologies can integrate the intermittent output with minimal costs. While a vast engineering literature simulates the potential impacts of volatile renewable output, very few economic analyses explore the environmental costs of renewable intermittency. In particular, no previous work empirically estimates the actual impact of volatile renewable production on fuel use and emissions. Using historical data on renewable generation and emissions from fossil fuel generating units in California, this project seeks to identify the impact of renewable intermittency on the short-run costs of providing electricity and the resulting air pollution created by the electric sector. The results will serve as a valuable input for evaluating the current renewable energy policies. In addition, the information provided by this project will help guide the development of new market rules that can potentially lead to more efficient renewable capacity investments.
Animal Health Component
(N/A)
Research Effort Categories
Basic
100%
Applied
(N/A)
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
1330410301025%
1336199301025%
6050410301025%
6056199301025%
Goals / Objectives
Quantify how short-run volatility in renewable electricity (i.e. intermittency) affects the amount of air pollution emitted by interconnected fossil fuel generating units in the California electricity market. Recommend improvements in renewable energy policies and renewable siting processes that will mitigate the potential environmental impacts of renewable intermittency.
Project Methods
This project will empirically estimate the impact of short-run volatility in renewable electricity on the combustion of fossil fuels and emissions from the California electricity sector. Data will be collected from a variety of sources. The Environmental Protection Agency (EPA) records hourly fuel use and emissions from fossil fuel generating units. In addition, the California Independent System Operator (CAISO) records the sub-hourly generation from wind turbines located throughout the state. Using a reduced form approach, I will identify how volatility in renewable output - over different time frames (e.g. within-hour, within-day, etc.) - affects the total fossil fuel use and the total pollution created by the electricity sector. The empirical results will shed light on the magnitude of the environmental costs imposed by renewable intermittency. If volatility in renewable output increases air pollution, this will highlight the need for policies to incentivize spatially and technologically diverse renewable capacity investments.

Progress 11/05/13 to 09/30/18

Outputs
Target Audience:Results from the research conducted under this project were presented at numerous workshops in California, Washington DC, and internationally (e.g., Canada, Australia, New Zealand). These workshops and seminars included academic researchers, policymakers, and energy industry participants. In addition, results from the research conducted under this project were presented to the U.S. Department of Energy as well as the Electricity Analysis Team at the U.S. Energy Information Administration. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?With regards to training, I have begun serving as the major advisor for a Ph.D. student (Kevin Nakolan) in the Ag. & Resource Economics Department at UC Davis. My advisees research is building on the work conducted under this project to further explore the impact of California's solar capacity expansions on local air quality. With regards to my professional development, this project has provided me the opportunity to present my work to a broad audience (e.g., U.S. Department of Energy, U.S. Energy Information Administration, California Energy Commission, California Public Utility Commission). Through this process, I have made important new connections with a wide network of industry participants. How have the results been disseminated to communities of interest?The results from the research conducted under this project have been presented to the target audience (i.e. academic researchers, policymakers, and industry participants) at numerous academic conferences, academic seminars, and workshops. In addition, results from the research have been summarized in two working papers submitted to academic journals. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? This project had two major goals. The first major goal was to provide insights and new knowledge surrounding how expansions in renewable electricity capacity affect electricity markets and the emissions released by the interconnected electricity generators. With regards to this first goal, the research conducted under this project has resulted in two completed working papers that have been submitted for publication in academic journals. The first research paper ("Setting with the Sun...") summarizes new insights surrounding the impact of solar and wind capacity expansions in California on California's electricity market and the interconnected generators. In particular, the results reveal that solar expansions have begun to reduce the profitability of low cost, cleaner generating nuclear and natural gas generators. The second working paper ("Emissions, Transmission,...") provides important new insights surrounding how expansions in transmission capacity can increase the environmental value of electricity produced by wind and solar generation. The second major goal was to provide new insights and knowledge surrounding how renewable energy policies can be improved. With respect to this goal, the research conducted under this project, and in particular the results presented in the two working papers discussed above, provide several important policy recommendations.

Publications

  • Type: Journal Articles Status: Under Review Year Published: 2018 Citation: Bushnell, James and Novan, Kevin, "Setting with the Sun: The impacts of renewable electricity on wholesale power markets", Working Paper, 2018.
  • Type: Journal Articles Status: Under Review Year Published: 2018 Citation: Fell, Harrison, Daniel Kaffine, and Kevin Novan, "Emissions, Transmission, and the Environmental Value of Renewable Energy", Working Paper, 2018.


Progress 10/01/16 to 09/30/17

Outputs
Target Audience:During the reporting period, results and finding from my research efforts were presented at two workshops (Hass Energy Institute, Berkeley CA and Resources for the Future, Washington DC) which included academic researchers and energy industry participants from both California (e.g., the California Energy Commission, Investor Owned Utilities, Municipal Utilities) as well as internationally. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The results from the working paper examining the impact of California's solar capacity expansions has been presented to energy industry participants from California (e.g., the California Energy Commission, Investor Owned Utilities, and Municipal Utilities), policymakers, and academic researchers through multiple workshops. What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period, I will continue to conduct research examining the market and environmental impacts of policies driving expansions in intermittent renewable electricity generation.

Impacts
What was accomplished under these goals? A combination of state-level mandates and federal tax credits have driven a surge in U.S. renewable electricity capacity. Utility-scale solar and wind farms, which produced less than 0.7% of total U.S. electricity in 2006, accounted for nearly 7% of output in 2015. With ambitious renewable mandates being passed in many states - e.g., by 2030, renewables must provide at least 50% of the electricity supplied by California's public utilities - the growth in renewables shows no signs of slowing. My research focuses on examining how a greater reliance on renewable energy sources (i.e. wind and solar) affects prices in electricity markets as well as the environmental impacts of the electricity sector. In particular, during the reporting period I completed two working papers. The first working paper (joint work with Jim Bushnell) examines how growth in solar generation capacity in California has impacted market prices and the profitability of generators in the region. The results reveal that increases in wholesale solar capacity has driven down the midday wholesale electricity prices but increased the early morning and late evening wholesale prices. As a result, low marginal cost sources of electricity that produce during all hours of the day (e.g., nuclear and clean burning combined cycle natural gas units) have experienced large reductions in their profits. In contrast, less fuel efficient, and higher polluting, gas turbines that operate during the peak demand evening hours now produce more often and have experienced increases in their profits. These findings highlight that the environmental benefits of solar capacity have been overestimated by previous research. This paper has been presented at workshops and will be submitted for publication during the upcoming year. The second working paper examines how the environmental impacts of renewable electricity is impacted by growth in transmission capacity. In many cases, locations with the highest renewable energy potential are located far from the heavily populated demand centers where the majority of electricity is consumed. Given the existence of transmission constraints between the renewable rich regions and the demand centers, output from wind turbines and solar panels often displaces fossil generation in sparsely populated, nearby locations. In joint work with Daniel Kaffine and Harrison Fell, we find that increasing transmission capacity between the renewable rich locations and demand centers provides a previously unaccounted for benefit. In particular, we demonstrate that with greater transmission capacity, renewable output will offset more fossil generation near the demand centers, providing substantially larger benefits in terms of avoided health costs. This second working paper will be submitted to academic conferences during the upcoming year.

Publications


    Progress 10/01/15 to 09/30/16

    Outputs
    Target Audience:During the reporting period, I completed a report targeted at policy makers (the U.S. Department of Energy) summarizing the impact restructuring/deregulation has had on the U.S. electricity sector. In addition, I published an article examining the potential impacts of retail market reforms in California's residential electricity sector. The article was disseminated to an audience of policy makers, industry participants, and professionals throughout the state interested in resource and environmental economics. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?I published an article in the Agricultural and Resource Economics Update (ARE Update) focused on the potential impacts of reforms underway in California's retail electricity sector. The ARE Update article has been distributed widely among policy makers, industry participants, and California customers. In addition, a report summarizing the impacts of restructuring in the U.S. electricity sector was prepared for the Department of Energy. What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period, I will continue to work on two research papers examining the impact of wind and solar electricity generation on the cost of generating electricity. The first paper utilizes solar generation data acquired from the California Independent System Operator. The project examines how the growth in California solar generation is affecting electricity prices and pollution in the California electricity sector. The second paper utilizes hourly wind generating data and hourly fossil generation data provided by the U.S. Environmental Protection Agency. The project examines how short-run fluctuations in renewable output affects the performance of fossil fuel generators throughout the country. The results from these projects will be presented at academic conferences and submitted for publication in academic journals.

    Impacts
    What was accomplished under these goals? I have made progress on two empirical research projects examining the impacts of renewable electricity on the performance of the electricity sector. The first project identifies the costs savings and environmental impacts stemming from expansions in California's solar generation capacity. A preliminary paper will be presented at departmental seminars for feedback. The second project examines the impact of wind generation on the performance of fossil fuel generators located throughout the country. Preliminary results from this second analysis have been submitted to upcoming academic conferences. In addition, during the reporting period I completed two research papers. The first is a report summarizing the effects of restructuring in the U.S. electricity sector. This report was prepared or the U.S. Department of Energy and will be submitted to an academic journal for publication shortly. The second completed paper summarized the potential impacts of reforms underway in California's retail electricity sector. The paper was published in the Agricultural and Resource Economics Update.

    Publications

    • Type: Journal Articles Status: Published Year Published: 2016 Citation: "Should Communities Get into the Power Marketing Business?" Agricultural and Resource Economics Update, Volume 19, No. 6, Jul/Aug 2016.


    Progress 10/01/14 to 09/30/15

    Outputs
    Target Audience:During the reporting period, I continued to work with employees at the California Independent System Operator (CAISO) to gather and analyze high frequency data on wholesale electricity prices and wind and solar electricity generation. Preliminary estimates of the effects of California solar generation on the regional electricity market were presented and discussed with researchers at the National Renewable Energy Laboratory (Golden, CO). In addition, I began work on a report for the U.S. Department of Energy focused on summarizing the insights from the economic literature on the efficacy of deregulated electricity markets at integrating intermittent, renewable electricity. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Preliminary estimates of the impact of California solar generation on the regional electricity grid were presented to researchers at the National Renewable Energy Laboratory (Golden, CO). What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period, I will continue to work with the historical renewable generation data from California -- as well as historical renewable production from Texas -- to examine the impacts of renewable electricity on the interconnected fossil fuel generators. In addition, I will complete work on a review article summarizing the insights from the current economic literature focused on studying the interactions between deregulated electricity markets and intermittent, renewable electricity.

    Impacts
    What was accomplished under these goals? Using the newly compiled dataset of high frequency California solar generation, I produced preliminary estimates of the impact of CA renewable output on wholesale electricity prices and on the production from fossil fuel fired electricity generators in the region. These preliminary results were presented and discussed with researchers at the National Renewable Energy Laboratory. In addition, I established contacts at the US Department of Energy's Energy Policy and Systems Analysis group who have requested a report summarizing the interactions between electricity markets and renewable electricity.

    Publications


      Progress 11/05/13 to 09/30/14

      Outputs
      Target Audience: During this reporting period, I worked with employees of the California Independent System Operator (CAISO) to gather high frequency price, electricity generation, and forecast data required to analyze the impacts of renewable intermittency. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals? During the next reporting period, I will develop and estimate econometric models that identify the impacts of short-run changes in renewable output on electricity prices, fossil fuel consumption, and pollution.

      Impacts
      What was accomplished under these goals? I established contacts with industry participants that were able to provide access to the CAISO data required for the analysis. Information available from public sources (i.e., EPA and FERC) was gathered and merged with the CAISO data to create a new dataset that will be used to estimate the impacts of renewable intermittency.

      Publications