A report by Brattle economists outlines the key reliability challenges and defines the attributes in which electric grid operators should focus on in order to maintain and strengthen system reliability.

The transformation of the U.S. electric industry, driven by technological innovation, changes in the industry’s cost structure, and environmental concerns, is leading to a greater share of electric generation from variable energy. To ensure reliability as variable energy resources’ share of total generation grows, grid operators will need access to more flexible power plants, storage, and demand response resources that have a diverse set of reliability attributes that can meet these requirements.

The Brattle report outlines two key principles all jurisdictions should consider when determining their needs for reliability attributes. First, variable generation resources can create additional reliability needs for the system. Second, resources with reliability attributes that meet these needs should be appropriately valued. With these two principles in mind, the authors identify three important issues for market designers and system planners to consider going forward:

  1. The marginal capacity value of variable generation resources can decrease as penetration increases. To minimize costs and maintain reliability for consumers, it is important that variable generation resources receive compensation for the value of the capacity resources they provide.
  2. Obtaining frequency response will be increasingly important as increased reliance on variable generation resources decreases system inertia and increases frequency volatility. This will create a greater need for primary, secondary, and tertiary frequency response products.
  3. Fast-ramping resources will be critical to integrating variable generation resources that increase the variability of net load.

The Brattle report also outlines the key attributes that contribute to grid reliability and discusses their importance in the context of these ongoing changes to the grid. The authors note that the mechanisms for valuing the reliability attributes will differ between restructured markets and regulated states, and the relative value of different attributes will also vary between different regions. However, in all regions and jurisdictions, ensuring economically appropriate compensation for the attributes identified will be important to maintaining system reliability.

The report, “Diversity of Reliability Attributes: A Key Component of the Modern Grid,” is authored by Brattle Principal Ira Shavel, Senior Associate Michael Kline, Associate Roger Lueken, and Senior Associate Pablo Ruiz. It was prepared for the American Petroleum Institute (API) and can be accessed below.

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