Regulation and Incentives Will Build a Reliable Grid

The right regulation and support mechanisms must be in place to enhance grid stability and reliability.
Published: Wed 20 Aug 2014

There are a number of diverse challenges that network operators face in terms of playing their role in the sustainable energy mix. This is according to Alain P Steven, secretary general of GO15, formally known as the Very Large Power Grid Operators Association which is a voluntary initiative of the world's 16 largest power grid operators.

In an exclusive interview with Engerati at the European Union Sustainable Energy Week, Steven explains that while the challenge for India and China is rapid expansion due to the growing level of energy consumption, the more established countries like Europe has the challenge of creating a more diverse energy mix.

These sources are often located far from load centres and as a result, power grids have to be reinforced to enhance stability. Improving grid resiliency is another challenge as super storms grow in their numbers and strength, he adds.

Incentivizing energy storage development

The power grids need some support for ‘centered inertia’, explains Steven. He adds that as more intermittent sources are being connected to the grid, it is becoming more unstable. To regain stability, solutions such as storage must be implemented and mechanisms must be designed to incentivize energy storage development.

Steven points out that there are markets around the world that incentivize third parties to provide energy storage solutions. Since large-scale storage solutions tend to be costly, subsidies are still needed. “It is important that the right mechanisms are put into place in order to make storage financially viable.”

Steven points out that it is important to establish organized energy markets and markets for ancillary services. He points to the PJM area and other regions in the US that have markets which provide incentives for third parties to introduce resources that will make up for intermittency issues. In 2012, PJM introduced the pay-for-performance market for frequency regulation [Engerati-Frequency Regulation and Energy Storage]. This ensured that US$30-US$40 per MWh was paid to provide a response to a signal coming from the system operator. This means that a 1MW battery for example would be paid off in less than 5 years. In essence, the market is paying for the storage solution, says Steven.

“Smarter” regulation needed

The US regulator introduced this rule to make up for the intermittent nature of renewable generation, says Steven. To deal with this intermittency, the grid needs a portfolio of active generation, flexible loads and storage. While this portfolio is critical, the right regulation must be in place to incentivize companies to create solutions. “If the right incentives are in place, utilities will have better control of its resources,” explains Steven.

“GO15 believes that solutions are there to be implemented but “smarter” regulation must be in place to support them. The right regulation will provide the right incentives to the right entities to provide appropriate grid reliability. The right regulation is the key to attaining grid reliability.”