Benjamin F. Hobbs Benjamin F. Hobbs Theodor Theodore K. and Kay - PowerPoint PPT Presentation

Benjamin F. Hobbs Benjamin F. Hobbs Theodor Theodore K. and Kay K. and Kay W. Schad W. Schad Prof rofessor or of of Env Environm onmental ntal Mana Management nt Whiting School Whiting School of Engineer of Engineering, ing, JHU JHU Founding Director, E Founding Director, E 2 SHI SHI Chair, C air, CAISO Market ISO Market Surveillan Surveillance C e Committee mmittee Worksh Workshop on op on Economic Approach Economic Approaches es to Unders to Understanding tanding and and Addres Addressing ng Resilien Resilience in the Bulk ce in the Bulk Power System Power System RfF RfF 30 May 2018 30 May 2018

 General principles  Three classes of disruptions Mainly markets Primarily Planning I. Traditional III . Long, II . Extreme resource wide-area supply adequacy network outages, (independent outages multiple or correlated stressors forced outages)

 When regulation/central When regulation/central  When rely on markets? When rely on markets? planning? planning? ◦ When sol When solutions tions not not obvious, re vious, require quire private private ◦ So Solutions lutions o obvious vious information information ◦ Actions by Actions by many (price- many (price- ◦ Acti Actions by s by few or few or 1 party 1 party taking) parties needed taking) parties needed needed needed ◦ Responsibility/propert sponsibility/property ◦ Public good, markets likely Public good, markets likely rights can rights can be assign be assigned & ed & to be suspende to be suspended in event d in event traded traded ◦ When events are When events are (relati (relatively) ely) ◦ Events rare, potential Events rare, potentially ly frequent, not severe frequent, not severe catastrophi catastrophic

 Assume: Assume: ◦ Generator outages are random .. Generator outages are random .. ..and (conditionally) indepen ..and (conditionally) independent of ent of each other & of each other & of load load  Classic engineering methods: Classic engineering methods: ◦ LOLP LOLP by convolution methods by convolution methods (Billin illinton on/Allan) /Allan) ◦ Expe Expect cted Load Load Carryin Carrying Capabilit g Capability (Garver, (Ga ver, IEEE TPAS IEEE TPAS , 1966) 1966) = Increase in peak = Increase in peak load th load that can be accommodated by at can be accommodated by addi adding ng resource resource … while maintaining LOLP … while maintaining LOLP  Can be extended to: Can be extended to: ◦ Correlated outages Correlated outages, e.g.: e.g.:  100 MW 100 MW unit, 0.1 unit, 0.1 FOR, 0 FOR, 0 correlation correlation  EL ELCC = CC = 92 92 MW MW  If 0.3 corr If 0.3 correlation ion  EL ELCC = CC = 55 MW 55 MW (Base (Based on N load, on N load, 2000 MW peak 2000 MW peak hour, hour, ident identical units, LOLP = units, LOLP = 2.4 hr/yr) 2.4 hr/yr)

 Saint Fred (Schweppe): Spot markets with Saint Fred (Schweppe): Spot markets with appropriate scarcity pricing alone can incent appropriate scarcity pricing alone can incent optimal investment and flexibility optimal investment and flexibility  Capacity markets can too, in Capacity markets can too, in theory theory ◦ Desirable if: Desirable if:  scarcity underpriced in scarcity underpriced in spot markets, or spot markets, or long run contract long run contract markets absent markets absent ◦ General result General result (Bothw , 2017) : (Bothwell, ll, Hobbs, Hobbs, Energy Energy J J , 2017)  There exist supporting prices for optimal generation mix: There exist supporting prices for optimal generation mix: Capacity market pays each generator: Capacity market pays each generator: (margin (marginal capacity contr apacity contribu butio tion) * (market price for * (market price for capacity) capacity)  MCC = MCC = ∂ (expected unserved energy)/ (expected unserved energy)/ ∂ (capacity) (capacity)

 Need good Need good rules rules ◦ Credits based on marginal contributions Credits based on marginal contributions ◦ Forfeit payments if Forfeit payments if unavailable when unavailable when needed needed  Simulate impact of Simulate impact of efficient spot market efficient spot market ◦ Look-ahead, locational Look-ahead, locational  However, awkward way to incent However, awkward way to incent flexible flexible investment investment ◦ CAISO FRACMOO. CAISO FRACMOO. But how do you compare the following? But how do you compare the following?  Fully dispatchable CTs Fully dispatchable CTs  4 calls/mo 4 calls/mo demand respons emand response  Rene Renewables wables that can turn down that can turn down  Fly wheels ( Fly wheels (15 minutes stored) 15 minutes stored)  1 start/day resources 1 start/day resources ◦ Problem: What’s the marginal contribution when: Problem: What’s the marginal contribution when:  operating conditions & syst operating conditions & system response are complex? em response are complex?  event probabilities event probabilities, failure failure mechanis mechanisms poorly known? ms poorly known? ◦ Belts and suspenders Belts and suspenders (Bushnell, Harvey , Hobbs, CAISO MSC) : (Bushnell, Harvey, Hobbs, CAISO MSC) Improve spot markets to reward output when system values it Improve spot markets to reward output when system values it

 “ When sorrows come, they come When sorrows come, they come not (as) single spies. But in not (as) single spies. But in battalions battalions .” (King Claudius, .” (King Claudius, Ha Hamlet et Act 4 Scene Act 4 Scene 5 , Thx to Thx to Kousk Kousky and and 03.pdf ) Cooke, RFF-D Cook RFF-DP-0 -09- 9-03. ◦ Multiple e Multiple events w ents without pre thout preceden edent, no agreed upon pro t, no agreed upon probabilities abilities  California 2000-01: California 2000-01: Seven Plagues of Egypt Seven Plagues of Egypt ◦ Fuel (compressor outage) Fuel (compressor outage) ◦ Hydro shortage Hydro shortage ◦ NO NO x allowan allowance shorta e shortages ges caiso.com ◦ Kelp Kelp  Compounded Compounded by by market design failures market design failures

 Feb. 1-4, 2011 Feb. 1-4, 2011 cold snap cold snap  210 units 210 units on on outage outage  High load High load  4 GW curtailed 4 GW curtailed www.powermag.com/prepare-your-gas-plant-for-cold-weather-operations/

Fukushima: Fukushima: 17% of Japan’s 17% of Japan’s capac capacity ity lost lost www.carbonbrief.org/analysis-the-legacy- of-the-fukushima-nuclear-disaster

 Not spot markets alone. Not spot markets alone. For extreme events: For extreme events: ◦ Pro Probability e ability estimates unreliable mates unreliable ◦ Insurance unavailable or Insurance unavailable or costl costly “... three “... three particular phenomena of particular phenomena of climate related risk climate related risks that will that will require a require a change in our think change in our thinking ab ng about risk managemen out risk management: global micro- : global micro- correlations correlations, fat tails, and tail fat tails, and tail dependen dependence. ce. “(The “(Their) consideration …will be r) consideration …will be particularly important for particularly important for natural natural disaster insurance, as they call in disaster insu rance, as they call into question traditional methods of to question traditional methods of secu securitization and diversification” ritization and diversification” (Kous (Kousky & Cook Cooke, RFF-D RFF-DP-09- 09-03 03-R -REV. EV.pdf, 2009) , 2009)  How to prepare against the unimagined risk? How to prepare against the unimagined risk? ◦ Inheren Inherently stable systems: ly stable systems: ◦ Achievable Achievable by: by:  diverse sources diverse sources  Baskin & Baskin & Robbins Robbins capacity markets capacity markets  more redun more redundancy ancy, ,  higher reserves, grid reinforcements higher reserves, grid reinforcements  island-able island-able  black black-start, microgrids art, microgrids ◦ Ye Yet w what are at are w we willing t willing to pay fo pay for r that st at stability? Is ability? Is the c e cure w re worse rse than the disease (regulatory than the disease (regulatory rent seeking, rent seeking, capture…..)? capture…..)?

(Mukherjee, Nateghi, Hastak, Reliability Engineering & System Safety , 2018)

 Casca Cascadin ing outages, g outages, system system collapse collapse Managing frequency excursions Managing frequency excursions ◦ in in a a renewable heavy system renewable heavy system Cyber in Cyber in security security ◦ What is Russia re What is Russia real ally capabl capable of? of?   Electromagnetic disturbance Electromagnetic disturbance ◦ Solar flare Solar flares ◦ Twitch Twitchy fingers y fingers www.cartoonistgroup.com/properties/anderson/art_images/030823grid.jpg

Natural disasters Natural disasters  Fire Fire  Earthquakes & Earthquakes & transformer replacement transformer replacement ( Ende Enders et rs et al. al. 2010 2010 Ene Energy Syst System ems ) www.businessinsider.com/pictures-of-californias-latest-wildfire-2016-6 www.tdworld.com/test-monitor-control/new-seismic-shock-system- helps-protect-power-grid