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Power Market Developments and Approaches to Renewable Energy Integration in China, India and the United States – Text version

Below is the text version of the webinar titled "Power Market Developments and Approaches to Renewable Energy Integration in China, India and the United States," presented on December 18, 2017.

Jeff Logan: Good morning and welcome to Power Markets Developments and Approaches to Renewable Energy Integration in China, Mexico and the United States. Good morning to those in North America and good afternoon to those in Europe and good evening for those in Asia. Thank you for joining us. My name is Jeff Logan and I help lead a project here called the 21st Century Power Partnership. This webinar is brought to you today by that project and by the Children's Investment Fund Foundation. So we thank them very much for helping make this possible.

We have a last-minute change in our agenda for the day. Originally Ricardo Bracco was scheduled to speak about Mexico but unfortunately, he had something come up and is not able to join us today but instead we have David Palchak who will be here describing power systems developments in India. We apologize for that last-minute change but it's really out of our control and we hope that you enjoy learning more about India.

Let me briefly introduce our speakers before we start. And we have an interesting collection of presenters today. First, joining us from Texas is vice president Chai Galfung with the state grid energy research institute. Dr. Chai is an expert in power system operation and planning and is leading a delegation from the state grid energy research institute to visit different power operators and research institutes in North America. And they'll be here until later this week. Thank you, Dr. Chai for joining us and we hope you're enjoying your time in Texas. I also want to say special thanks to Ms. Ella Jo who is in Texas with the delegation travelling with them. I believe they're visiting ERCOT and the Texas Public Utility Commission today and tomorrow.

I also want to welcome Erik Ela who is a principal at the Electric Power Research Institute. And Erik is joining us I believe from California. Dr. Ela had previous positions at NREL and at the New York Independent System Operators office. He is an expert at integration of variable renewable energy in the competitive wholesale markets. And I want to thank him for joining us early this morning.

Our third panelist is as I noted earlier David Palchak. He is a senior engineer at NREL and he's an expert on both demand response and renewable energy deployment modeling using PLEXOS. David has extensive experience in India and will today be summarizing a recent collaborative study of India's grid and how it operates after achieving different levels of variable renewable energy.

So before we begin, I wanted to very quickly talk a little bit about the 21st Century Power Partnership. I just have a couple of quick slides I want to show on that. And so hopefully you will all see the slide deck here. So the 21st Century Power Partnership is an initiative of the Clean Energy Ministerial and it was established about five years ago. And the Power Partnership focuses on power system transformation in large and rapidly developing countries. Integration of variable renewable energy is one of the issues that we focus on in the Power Partnership but so are smart grid and energy efficiency and demand response as well.

The Power Partnership does two types of work. Number one, it conducts thought leadership work on a variety of different power system transformation subjects. It also does deep in country technical assistance for countries like Mexico, China, India, South Africa and most recently Brazil. The Power Partnership focuses on faster learning, better tools, capacity building and partnerships to advance power system transformation around the globe. I have shown here on this next slide just some examples of the thought leadership reports that we published since 2012. And these thought leadership reports are generic in that they can apply to any country that's in a different stage of power system transformation. And then what we're going to learn about today is some more of the deep in country technical assistance that we provide. And in this case, we're focusing today on China and India as well as some discussion of what's happening in the United States.

So with that I want to just mention a couple rules of the road before we begin the first presentation. And those rules of the road include each country presentation will last for approximately 20 minutes. And if there are any clarifying questions that are needed to be answered between each of the country presentations we can spend a couple minutes doing that but otherwise I would like to ask that all questions are covered at the end. And we'll have enough time to do that and especially I'd like to point out and entertain questions related to cross cutting issues that all power grids are experiencing as they transition to higher and higher levels of variable renewable energy.

Everyone will be on mute during the webinar. But you can use the questions feature on Go to Webinar to submit your questions. So with that I will turn it over to Mr. David Palchak and we will learn more about what's happening in India. David?

David Palchak: Thanks, Jeff. Good morning everyone. So I'm going to talk about a recent renewable energy green integration study that we at NREL did with India. And so, I'm going to be digging into some details about that study, maybe a little more detailed than some of the other speakers this morning but hopefully give some context about what's going on in India during that talk.

Jeff Logan: Could you send the slides to register I believe. So just hold on. We're advancing them slowly.

David Palchak: Ok. So we had a number of partners and sponsors on this project. Probably the most important one being the ministry of power in India. That's sort of like the department of energy in the US. They are in charge of the transmission and generation and making sure everything is working in the power system in India. USAID was the primary funder for the overall project that we had 21st Century Power Partnership, World Bank and ESMAP also contributing to this study. We work very closely with PLEXOS who is the power system operators in India. They run the national regional grid and they were very involved in this and not only for their own benefit because they are looking to doing studies like this for themselves but also learning from this particular study. And we also worked with Berkley on this.

So right now, in India, they have a goal of hitting 160 gigawatts of wind and solar by 2022. So the overall goal is 175 gigawatts renewable energy. The rest, the 15 extra gigawatts will be from biomass and small hydro. So we wanted to look at this goal and understand how the system would operate in 2022. So that's not very far into the future but ultimately there's still a lot to be worked out in that process. When we started this study, this seemed like an extremely ambitious goal and that's been tapered a little bit to kind of being an achievable but still ambitious goal. Right now, they have about, I think it's around 40 gigawatts of wind although that's changing every day and 10 to 12 gigawatts of solar. So there's a long way to go in solar. With wind it looks like they're probably going to safely meet that.

And the other thing when looking at this operation is to actually make this usable for policy makers to put things into action where they can operate the systems and better integrate and make this more successful. One note on this is that fixed costs are not considered in this study. 2022 is not that far into the future. They have a lot of plans already in place with what they're going to build outside of the renewable energy as far as transmission and convectional generation. So we didn't consider getting to that point. We just went into 2022, dropped in and tried to understand what's going on in the system.

So a big part of this study as it is with many international grid integration studies is to have a review committee. And there have not been a lot of renewable energy grid integration studies in India. So we wanted to make sure we got around all of India and used expertise and input from everybody around the country who is involved somewhere, some stakeholder on the system. And so, we want to Delhi, Bengaluru and Mumbai on four different occasions and met with a number of experts to make sure that we were representing the systems well and also answering the questions the stakeholders have on the system.

So as far as the methods for this, we started with a system of basically today. And PLEXOS was very involved in this part of it. There's not a history of modeling with the types of models that we used in India. Yet PLEXOS was very involved with building today's system. We were basically starting from scratch to do that and making sure that we're capturing all of the nuances of the way the power system works so that when we look forward to the future, we're not making a lot of bad assumptions. Then we spent most of our time in that first box building the operations model and then we forecasted things for the future use for the new transmission, new generation in our model and then actually simulating the operations in the future year which our year was 2022.

So we used PLEXOS which is a production cost model. There are a number of different types of software that use this and it's a commercial tool and some of you are probably very familiar with it but it just models operations in the least cost way. Then we look at all of 2022. So in India right now they dispatch every 15 minutes and so we modeled 15-minute dispatch for the whole year.

So we looked at a number of different scenarios and you can see here that we're kind of switching around solar and wind targets, looking at different levels of solar and wind. But the one I have highlighted is the current government target. And that's the one everybody is focused on. So today I'm just going to talk about outcomes of that target, 100 solar, 60 wind. The other ones also had some interesting outcomes but everybody is very focused on hitting that target in India right now so that's what everybody wanted to know about. So we stuck to that.

So big part of these models is having a lot of good data. And one of the pieces that is particularly hard to get is the wind and solar data. So we modeled that here at NREL. We used numerical weather prediction models and satellite data to make sure that we have good representation of what wind and solar could actually provide to the system and capture the variability on the system. So that was a huge input to this. We also want to capture all of the other aspects of the system like all of the coal plant generators, the gas plant generators and all of the unique properties that might exist for those generators. So that's a big effort to collect all of that data and PLEXOS was very involved in doing that.

The two [inaudible] CEA and CTU which is the transmission utility have projected what's going to be built in 2022. We worked closely to make sure we know what's actually going to be on the system. And we also modeled transmission as well as we could based on some reliability standards. So most of the effort in this sort of study is in collecting all of this sort of data and making sure that we have it put together in the right sort of way.

So we represented transmission in a couple different ways to try and answer a couple different questions. So what I'm showing here is two maps of India and one represents how our model represents a national study and a regional study. And so, the national study which I'm going to spend most of my time talking about today, simplified intrastate transmission. So it assumes that within a state if you generate something you're going to be able to get that to the load without any constraints on the system. And so that is a single node per state or a single – you can think of it as a single substation per state. And we represent all of the transmission between the states.

When we moved to the regional study, we took all of the information we had down to 66 kilovolt transmission lines and put that into the regions with a lot of renewable energy. The reason we only put it in those regions is because these models take a very long time to run. And there's also a lot of unknowns about transmission down to that level right now. The plan for state level transmission are typically on a shorter timeline. So we don't necessarily know what's going to happen but we can learn a lot from just looking at what is already in the plans for the regional study. But I'm going to stick to what's in the national study and try and understand the bigger picture questions from this more simple transmission representation.

So I'm not going to spend too much time on this but part of this effort is trying to figure out where the wind and solar is going to be. And we have a lot of feedback from our stakeholders about where there are sort of already zones within the state and use best practice factors to place wind and solar around the country with some constraints around that. But this is just a map of where we put the wind and solar that we're projecting for 2022.

So I think this is planes. So what is this showing? This is a visualization that is publicly available. And what this is showing is the different generation that is happening around India and how that's affecting generation in other parts of the country. So on the map you can see that the circles are changing size. And those represent different fuel types. So in yellow you see solar. In the black and the gray is sub and super critical coal. In blue we have wind. And what you see here is the sun coming up, solar coming online, coal turning down and also some red coming up which shows the curtailment of that wind and solar.

And so, what we can see is not only where the curtailment is happening but also how that's affecting generation around the rest of the county. In the bottom right is just the summary of all of that fuel type added up in a way where we can kind of judge how wind and solar is impacting other fuel types on the system. And so, this kind of gives us just a nice view of what's going on in different parts of the country during all of these 15-minute periods of the year. And this kind of shows one really great outcome of the study is that the system does balance every 15 minutes of the year even though it's a pretty coal dominant system. And so that's kind of our big takeaway is that there's a lot of flexibility in the system if it's used around the country in a good way.

So I'm just going to step through a couple findings from the study. So the first one with 160 gigawatts of renewable energy, excuse me, wind and solar, 175 gigawatts total give me 22 percent of India's annual demand with minimal renewable energy curtailment. I think it was about one and a half percent renewable energy curtailment. So 22 percent is a good number to hit. But if you look at what that looks like for individual states, it can vary quite a bit. So there are some states where there is going to be a lot of renewable energy. They have a lot better resources and they're planning for higher levels.

So in the map you can see that this shows that the average renewable energy penetration as a percent of load and as a percent of generation in the green. You can see that some states especially in the south are hitting 40 to 50 percent penetration as well as Rajasthan in the north. And this is something that they certainly consider in the way they're going to operate their system in the future. There was also 21 percent reduction in emissions compared to a baseline scenario.

So something about modeling every 15 minutes is that we can look at how the system is balancing around each period of the day. So this is probably familiar to you. Something like California's sector where we're trying to understand what is flexible in the system and how is that working. And here you can see just an example day in July which is monsoon period in India. And in the black you have the load or the demand and in the orange, you have the net load which is the load minus the wind and solar.

And you can see that not only is the orange lower throughout the whole day but we do have a dip in the middle of the day. And the rest of the generation on the system being the hydro and the coal and the gas have to follow this orange line if we're going to efficiently use the renewable energy. But what we found is even though these are much, much bigger ramps, much bigger changes there is existing flexibility in the coal system to be able to manage this.

Another interesting outcome that we found was that we were able to retire a lot of coal, 20 percent of the coal capacity. And it did not significantly affect the operations of the system. So in the bottom left chart what you see are the plant load factors for each coal plant in India. So each little dot here represents a coal plant. And on the vertical axis is the plant load factor of that individual coal plant. So that is the amount of energy that the plant is providing throughout the year compared to the amount of energy it could have provided if it was running at 100 percent.

So in the left chart the 100 solar, 60 wind scenario, you see a lot of plans that have very low plant load factors, below 25 percent. Some of them are up above 75 percent which is a little more typical but the average is about 50 which is not that uncommon in India. Actually, the average right now is below 60 and certainly people are a little bit concerned about revenue sufficiency for those plants. But we found in the future with added renewable energy, it looks like that's going to be down near 50 percent. But if we retire a lot of the coal plants that are barely used, the system is still able to operate. And there are talk of emissions regulations that may retire some coal plants.

And so, this is just a useful outcome to understand is the system going to be reliable if either a) we have higher demand growth or some generators are forced into retirement? Are we at risk in that case? And we did not find that that was going to be the case.

We also wanted to look at a number of strategies for better operating the system. So what I showed was essentially our standard scenario where we put renewable energy on the system and we saw that it operated ok. But that doesn't mean that our strategies did better operating. And the first one on the left is by coordinating across states better. And we found that when we allowed better coordination within our five regions, that there was huge cost savings. So to go from what we call our state scheduling the dispatch, essentially how they're operating in 2014 to a more regionally focused scheduling and dispatch, we saved 6300 [inaudible] annually. That's about $920 million just in the operation of the system.

Another strategy is to allow more flexibility in the coal. So we looked at a scenario where we lowered technical minimums of coal plants from 70 percent to 55 percent. And this is a particular germane scenario now because they are looking at this. They do have a regulation for some of the coal plants to go down to 55 percent. But what we saw was a huge decrease in curtailment from 3.5 to 1.4 percent if all the coal plants of India were able to go down to 55 percent.

Another scenario we wanted to look at partly because it is of interest to just about everybody in the renewable energy space right now is do batteries actually help add value to RNE integration from a scheduling and dispatch perspective? And we found by putting a lot of batteries on the system, 2.5 gigawatts in our IRE space that it did not effectively change the way a system operated. It did not decrease curtailment a huge amount and did not decrease cost too much. But I do want to say that this is only on the scheduling and dispatch perspective. There are probably a lot of – there's probably a lot of value for batteries in other areas such as local transmission and congestion but from our perspective there's not going to be a lot of value in it that we found.

So the big key take away is essentially that India has a lot of latent physical flexibility to help integrate renewable energy. The challenge is going to be putting appropriate regulations in markets and [inaudible] in place to make sure that this flexibility can actually be accessed. For example, if a coal plants are incentivized to operate more flexibility as we saw they might need to do in the future without negative effects on their revenues might be worth looking into.

And number four just to kind of give a plug to the regional study which where we saw that as you put more transmission information into the model, there are more challenges. There's sometimes more curtailment of renewable energy. And so, planning the system so we don't run into those local issues is going to be important going forward. That's all I have. Thank you.

Jeff Logan: All right. Thank you very much, David. I do have one quick clarifying question before we move to our next country. And you noted earlier that the granularity of transmission constraints is held in check because it's so computationally intensive. How long does it take typical PLEXOS run to complete on a – I assume you're using standard office computers and not a super computer to do this.

David Palchak: We used, yes, a standard computer. The super computer could have been used. It wouldn't have necessarily sped things up that much. But if we tried to run a regional study just one scenario straight through for a single year it would have taken about a month and a half. So when we run a national study and we decrease the complexity we're able to run that in about 24 to 30 hours which allows us to ask basically a lot more interesting questions. We can have a little more confidence because planning down to that transmission level has not necessarily happened so we can get a lot of interesting answers out of the national study and we can also throw a lot more at it.

Jeff Logan: Very good. Thank you for that. So our next presentation is on China. And again, I'm very happy that Vice President Chai Galfung from the State Grid Energy Research Institute can join us. And I believe one of his colleagues will actually be delivering the talk on behalf of Dr. Chai but he will be able to answer questions as well toward the end. So with that we'll turn it over to our gang in Texas and thank you.

Female: Thank you, Jeff. Hi everyone. This is [inaudible] from State Grid Energy Research Institute. I will be presenting today on behalf of Vice President Chai. And we are going to present some experience and efforts of China to in the field of renewable energy integration and power market reform. I'm going to talk about three aspects today. So firstly, let's have a look at the development of renewable energy in China. Next slide please.

So if we have a look at the total installed capacity in China we can easily find out that coal is the major source of electricity generation in China. We have more than 57 percent of coal power plants installed in China. And the renewable energy including hydropower was more than 550 gigawatts at the end of 2016. And so far by the end of 2016 we have already about 150 gigawatts of wind power and 77 gigawatts of solar power. And during this year in the year of 2017, we have seen significant growth in solar power installation. So as we estimate now the total installed capacity of solar power is expected to exceed 100 gigawatts in China.

Next slide. Here is some background information on the grid development of China. So the power grid of China has been interconnected nationwide and we have major seven regional power grids. The China thousand power grid company runs the thousand power grid while state grid corporation of China runs most of the remaining region. So as you can see on state grids has built 15 high voltage lines in China including eight AC lines and 7 VC lines and other side lines are still under construction. So as we can see from the graph here.

And next slide please. So we have here a development of renewable energy in China. So the development of RE in recent years has been really rapid in China as we can see from both the total installed capacity as well as the electricity generation. Around nine percent of total installed capacity is wind by the end of 2016 and around five percent was solar. And if we have a look at the annual growth rate, the installed capacity growth rate of wind and solar are 26 percent and 92 percent respectively and in fact solar the total installed capacity of solar power almost doubled each year by year.

And as for the electricity generation, wind power generation makes up around four percent of the total electricity generation in China. And as for solar this percentage is around one percent so far. Yeah, and in 16 out of 34 provinces in China, wind and solar together have become the largest, the second largest power generation source. Next slide.

And here we have a quick look at the allocation of renewable energy in China. So geographically we can see that the power, wind power and solar power installations are quite concentrated in certain areas, mostly in the west or in the northwest. We have the wind power in the three north areas, mainly the northwest, northeast and northern China is about 77 percent of the total wind power installation in China. And we have in the west also 41 percent of total installed capacity of solar in China where it concentrates in the western part of China. And also, we can see that this resources, the wind and solar, they are very far away from the load centers in the east which brought some problems with the transmission which I will talk about later.

Next slide. So here are some figures about the utilization rate of renewable energy in China. In China we usually measure the utilization hours which is quite similar to the capacity center just that it is multiplied by 8,760 hours per year. So we can see that these utilization hours of wind power and solar power in China were around 1,800 hours or 20 percent for wind and 1,200 hours for solar which is around 40 percent effectively. So this jump comes to the second part where I will talk about the challenges of the renewable energy integration in China and the approaches we have taken here. So next slide please.

Yes, as we can see from the curtailment right here and the curtailed energy graph here, the challenges of wind and solar power curtailment, they have increasingly prominent in China. And in 2016 this curtailment of wind and solar power reached 17 percent and 10 percent respectively last year. So this has drawn the attention of the Chinese government and saw that the great companies and all the participating stakeholders. And according to the analysis – next slide please. According to our analysis the curtailment of renewable energy in China was kind of due to several reasons. So firstly, there was system flexibility problem in the system.

So we have very few accessible power plants available. For instance, a gas power plants, the pump storage power plant. And since we have mostly coal power plants installed in the system and some of them are even combined heat and power so CHT power plants which are less flexible for ramping up and down in the system with high renewable energy penetration. Secondly, it's due to the transmission limitations. We can see from previous slides that our resources are located very far away from the load centers in the east. So large transmission capacity is needed for the RE installation. However, the transmission capacity from those resources to the load centers, it's still quite limited. And the construction of the transmission facilities was lagging behind of the rapid development of renewable energy in those areas.

And certainly, there is also uncoordinated development between the resources, the generation and the consumption because in recent years the development of RE was significantly rapid and the demand for it in China is relatively small due to the economic slowdown. So this leaves little room for large amounts of renewable energy integration in China. And fourthly, we also have some policy and mechanism issues. For instance, we have those trade barriers existing in certain provinces. So it means that some provinces with high loads that they are even unwilling to import renewable energy from other provinces because they want to protect the for instance the benefit of their local power plant. And also, there is absence of cross provincial pricing mechanisms. So these are the four major aspects of the reasons behind the curtailment of renewable energy in China.

Next slide. To address this issue, we have taken measures from the major three aspects, the power supply side, the grid side and also the demand side. So if we have a look at the power supply side, the main path was to increase the flexibility in the generation fleet. From those thermopower plants they were operated in order to lower the technical minimum of these power plants. And for the CHT power plants, they were the heat and power generation are decoupled in order to leave more flexibility to ramp up and down in times where there are more renewable energies penetrating the system. And also, there are more pump storage power plant plans and they are also now under construction.

On the grid side, major – so the two key measures were taken. The first one is to expand the transmission capacity by getting new transmission lines between the resources and those load centers to relieve the congestion and to allow more and more renewable energy be transmitted to the load centers. And we also have taken some measures in terms of smart distribution grids which the course of development of distributed energy resources, DER. And on the demand side, so electricity consumption is encouraged. It is kind of encouraged as a substitution for traditional source of energy in areas such as heating. And also, we have some projects in demand response in some provinces like they have a platform for organizing the demand response resources.

Next slide. We have also taken some measures from the policy and market mechanism aspect. The first one is the priority dispatch of renewable energy. It means that while dispatching the grid or the power generation fleet, the renewable energy is guaranteed kind of the full extent of grid integration. And so, as long as there is no physical constraint in the system. And secondly, the red alert wind power investment. It means that so in February 2017, the national energy administration of China published their results, analysis results on wind power investment monitoring and sent out those red alerts for areas with high wind curtailment. In order to slow down the construction and investment of wind power in those areas already was high rates of curtailment.

And thirdly, there was cross provincial market for access to renewable energy started in August this year. So it means that during the off-peak hours when there is curtailment, a tendency to curtail wind power in some provinces which are unable to consume the renewable energy locally, they can also [inaudible] or enter into the system, into the platform and to export those access to renewable energy to other provinces. And since those prices are usually very low, other provinces are more willing to accept those energy and it helps reduce the RE curtailment in the exporting provinces.

The fourth one is the pilot project of ancillary service market in the northeast and other provinces. So the process of ancillary service markets here might be slightly different from those in the United States or in Europe. Here we have the mostly traded project in China. It means that the thermal units are reimbursed from the market if they are willing to further ramp down below a certain level and it gives the room for the wind generation in the system. And last but not least we have also started a voluntary REC system, the renewable energy credit system in China. And the companies can voluntarily purchase those RECs and subsidize renewable energy with that money. And also, we have an RPS system under discussion by the government and it may come into effect in the future.

Next slide please. With all of those measures taken in China we have already seen some decrease in the curtailment rate during the first three quarters of 2017. So we have seen the curtailment rate of wind power decrease to 13.5 percent and the curtailment rate of solar power decrease to 6.1 percent in the state grid area. And we expect to see further increase for the whole year of 2017. Next slide.

And we have also a successful case in Qinghai province in the west. So during the June the 17th and the 23rd of this year, 100 percent of the Qinghai load was supplied by renewable energy including hydropower for consecutively 168 hours. So we can see in the graph so the yellow ones here is the mainly the solar power and other renewable energy resources of Qinghai province. And then the blue ones are the hydropower in Qinghai province. So this province has a lot of hydro and solar power. And we can also see some wind, little area it demonstrates the imported renewable energy of Qinghai and the purple line indicates the load in Qinghai province. Next slide please.

So the last part is about the power market reform that I'm going to address. Next slide please. And here is a brief timeline of the Chinese power sector reform evolution. We can see that the reform has been divided into several stages. So around the time of 1997 to 2001 there was a separation of the power input price from administration. And then in the year of 2002 the largest restructuring happened this year by separating kind of the vertically integrated power company into two power grid companies by generation group and for power construction groups. And also, the regulatory body was established during that year.

And in the process of 2003 to around 2014, there were also other reform explorations such as price just dealing with the market and direct trading or direct purchase in China. And in 2015 so two years before, the number nine document was issued by the government and it marked the beginning of the new round of reform in China. The main tasks were basically to reform the transmission and distribution tariff to establish a power market and also open the retail market, etcetera. Next slide.

And here this graph shows the power market in China before and after those reforms. So before the reform we can see that there are the generation, the power grid company and then the end consumers. So both the generation tariff and the retail tariff are assessed by the government. And there were some like pilots of direct purchase which allowed large consumers to directly trade with generation companies to get a little lower prices than the government's set tariff. And now after the reform it's more diverse.

We have kind of three major groups of consumers, the regulated consumers, they are mainly small or residential customers. They are still supplied by the power grid companies and they are supplied as government's set price. And for large customers they can directly purchase from the generation companies through bilateral contracts or centralized bidding. And the rest of the consumers they can purchase the paid and the market through the power retail companies or retailers. So this is basically how it works after the reform, the Chinese power market.

Next slide please. We have the major task in this round of reform to create a competitive electricity market and to establish also the power exchange centers which are relatively independent. As for the electricity market we have the set the goal of creating a market with both long term trading and source markets and we need to encourage more market players to participate in the direct trading. And also, to improve the cross provincial trading mechanisms and establish their prioritize generation and consumption mechanisms. These are mainly designed for RE and also other high self-generation resources or special cases.

And so power exchange centers, they were already – so there are two national power exchange centers established in [inaudible] and in Beijing respectively. And also for each province there is the provincial power exchange center established. And now we have already formed a fair and already competitive, alternate and fair market platform in China. And also in some provinces there is the market management council created. Next slide please.

And this slide introduced the long-term trading in China. It basically includes the bilateral contracts which are difficult and also the centralized trading mechanisms. It takes place between those generation companies and the retailers or consumers. It usually takes place once in a year or on a monthly basis. The products traded here, they are mainly the total amount of [inaudible] in that period. Here we have an interesting case from Guangdong province which is one of the earliest provinces to allow retailers to participate in markets.

There are two forms of long term trading, the yearly bilateral contract and the monthly centralized bidding. And here in the bar chart we can see the results of monthly bidding. The axis is the month and here on our left hand we have seen it is actually the absolute price reduction from the generation tariff set by the government which is the blue line here. And the red part, the traded volume in 1,000 gigawatt hours so we have seen from the Guangdong practice that more market players are encouraged to enter the competition and the traded volume is increased month by month. And there are lower prices generated from this bidding. Next slide.

And here is about the spot market progress in China. In August in the NDRI, NDRC and NEA of China issued a policy to start the pilot for spot market in China and they have chosen eight districts or provinces here to start the first pilots especially in Guangdong province. There is some progress here. The Guangdong province spot market will be designed together by China electric power institute and the PGM. And the next slide.

So as a conclusion we would like to point out that China's power sector is still in the middle of rapid development and we face not only the challenges of renewable integration but also some transition towards a smarter grid and the reform of power markets as well. So this multiple growth, the driving forces of China's power sector reform, we are also making continuous efforts to reach those goals. We believe that China's power system as well as the power markets will be more friendly to RE and it also will offer more choices to the market participants to join. So thank you for your attention.

Jeff Logan: All right. Thank you very much for that presentation. That was very interesting material and very clearly delivered. I do have one quick clarifying question. And you talked a lot about curtailment of variable renewable energy in China. And I did not hear the words about minimum runs times for coal plants and I'm just wondering if you could clarify for our listeners China's policy on providing minimum number of hours for operation of coal plants at the national level.

Female: So for the minimum operating hours of the coal power plants, I mentioned that the technical minimum was lowered for the thermal power plants. It is both from the technical aspect and also from the mechanism aspect. So for the technical aspect it is lowered because those power plants were upgraded from a technical level and they can ramp down to lower levels of operating points. And from the mechanism aspect, I mentioned about the [inaudible] market in northeastern part of China. It offers incentives for thermal power plants to ramp down further below their kind of given operating point in order to provide room for wind integration. So it kind of acts as a policy or a mechanism measured to lower the minimum output of those coal power plants. I don't know if that answers your question.

Jeff Logan: Yes. That helps very much. Thank you. All right. We'll move to our final presentation. Thank you again from Texas. We'll move to our final presentation of the day and we have Erik Ela on the line to talk about trends in US electric power markets and regional integration. So without further ado, Dr. Ela.

Erik Ela: Thank you. Ok. So I have a few slides here to sort of touching a number of different topics. Obviously, there are a lot of things going on in the US power markets that could take multiple days to talk about so I wanted to try to collect a few that I think are maybe most important given the topic of both electric power markets and renewable integration. Do I have control of the slides or –

Jeff Logan: I will be forwarding the slides at your request.

Erik Ela: Ok. Next slide. Ok. Agenda for the discussion today, give a brief introduction of the North American Independences and Operators Regional Transmission Organizations. What are the current market products and services that they each provide as part of those electricity markets? We'll also talk about how variable energy resources impact market outcomes and potentially on the market design. And then finally how are the markets evolving going forward to changing resource mix. And I think there was some interest in giving some specific examples in California so we have a few discussion points around that as well. Next slide.

I wanted to give a brief introduction on the grid operations and planning. We really have kind of four areas of research in the bulk power system operations and planning research area. Bulk power operations on the upper left there, grid planning on the upper right and then on the bottom left market operations and market design. And then the bottom right really looking at a lot of these different topics but in regards to integrating renewables on the bulk power system, number of different projects that fit into each of those. Next slide.

So organized electricity markets in North America – and I think Jeff actually there might be an animation pop up here if it's – ok. And then I apologize. There might be a few of these that I forgot about. So there are nine ISOs or RTOs in North America and actually if you consider [inaudible] in Mexico perhaps ten but this is showing US and Canada and the map of each of those RTOs. They serve now probably more, probably around 70 percent of the consumers in the United States, more than 50 percent of Canada's population. A couple of the numbers there on the upper right as well.

And I'll talk a little bit later on so I don't need to spend too much time on it but the energy imbalance market in the western United States is sort of a unique aspect of not necessarily a full ISO or RTO but a way that multiple utilities can trade energy with each other. And so, we've seen an expansion in some of the RTOs on the left there over the last four years with MISO adding its MISO south area, SPP adding some of their utilities in the northern part of the central planes there and then obviously the energy imbalance market. There's been an expansion from California east of the state there. Next slide.

So just a few characteristics and I won't go through all of this but just to give an idea especially for our international colleagues on the different ISOs. This has the seven ISO, RTOs in the United States and shows some of the statistics around peak load, total generating capacity, how many generating units are in each area, energy and miles of transmission. So we have some very large RTOs in PTAM and they've gotten an ISO and then some of the ones in the northeast smaller in scale. Some single states, some multiple states. It just gives an idea of kind of the scale of these and how they might compare to some of the international ISOs or transmission system operators. Next slide.

Ok. I think there's – yeah, I think I should have eliminated all of the animations here. So what are the current market products in these electricity markets today? In our energy markets we have day ahead energy, real time energy. So, we have generally speaking a two-settlement market. Some areas in California there's actually somewhat of a three-settlement market. And we also have what's called virtual trading. Virtual trading is essentially the ability to buy or sell on a day ahead market and then sell or buy the real-time market without necessarily having any physical asset. And that's sort of our [inaudible] against the different prices in both of those options.

And again, all of the US and all of the North American electricity markets we have various sets of ancillary service markets. There's a number of different forms of reserve or operating reserve markets. These are market based. Regulations really a form of reserve for controlling the short-term imbalance within a particular area, reducing area control error and in some cases frequency area. That's also a market based service. Then we have other services – and this is not an exhaustive list but that are cost based in that there isn't a market based price and sort of a competition to provide the service but any resource that's providing the service has the ability to recover any incremental costs that incur in order to provide that service.

So two examples there are voltage support or reactive power support and then black start service as well. All of the ISOs have financial transmission rights. This is in place for mostly for hedging against locational price volatility. In some cases, market players can participate in these markets as well to speculate whether the auctions might provide greater value than the congestion pricing that happens in the energy markets. Each of the different markets also have auction revenue rights that sort of correspond to who earns the revenues that come from the auctions of the financial transmission rights and these all have quite a bit of difference in ISO or RTO. And then finally, a number of the northeastern areas, in fact four of the ISOs, currently have capacity markets. These are mostly in place for assuring that an ISO can meet a planning reserve margin which might be the year ahead or maybe three years ahead and that there's additional money earned by those resources such as dedicated to provide capacity to the ISO and that they're able to have some additional money for covering fixed and capital costs. Next slide.

Ok. So the timelines of electricity markets in North America, we have long term power purchase agreements sometimes as far as 20 years ahead. Forward capacity markets, these are usually three years ahead in some of the ISOs. Other ISOs have seasonal or annual capacity markets. These might take place a few months ahead or up to six months ahead and that's the same for financial _ rights options which usually take place a few months before their timelines before they start.

And then we have day ahead energy and ancillary service markets that occur usually around noontime of the day prior and then finally our real-time markets happening just a few minutes actually before real time for both energy and ancillary services. And then after the fact, usually they're a week or a month after depending on the type of settlements that are occurring. There's the procedures that go forth into settlement stuff for resources and any types of price corrections that happen. So that's just a general timeline of US electricity markets. Next slide.

So how much money flows through each of these markets? The chart above is actually taken from I think the ERCOT state of the market report from 2014 and then the bottom chart is something that we put together here at _ to kind of look at what's the volume of revenue that's going through each of these different product areas that we discussed. And you can see that there's a bit of variety. Obviously, the larger markets like PGN and MISO up to $50 billion.

And one thing I should mention is that in 2014 which this data is for that included the January polar vortex where prices where excessively high for the majority of the month there. So these numbers are probably a little bit higher in some of the areas that were affected by that than they are in normal years. But high numbers and total market volume. You can see some of the differences. Typically, between 80 and 90 percent of all that's going through the energy markets in those areas that have capacity markets with the exception of MISO which the capacity market is more voluntarily did the three ISO New England, New York and PGIN that have mandatory capacity markets that have been established for some time.

Capacity markets are really the second highest volume in terms of revenue there. And then other things like ancillary service markets are fairly small, one to two percent maybe of the overall revenue. Your uplift which is sort of the side payments that go through the various different settlement procedures and can differ based on the year and different resources might have more than others. But that's usually a fairly small percentage as well.

And then the financial transmissions rights auctions, that trends towards the ISOs that have the most congestion. So you might see in some areas in PPG and MISO have some significant congestion during some years. So if that financial transmissions right auctions are aligned with the amount of congestion, then that can be in the billions of dollars. Otherwise it's with areas without as much congestion usually on the smaller end of that scale. Next slide.

Ok. So what are some of the impacts of variable energy resources on electricity markets? So obviously the low variable cost of wind and solar can reduce the average energy prices. The variability of these resources can also increase the variability in the prices being seen, greater differences between times based on the change of the net load that's occurring across time and [inaudible]. It can cause a greater disparity between prices of day ahead markets and real-time markets due to the uncertainty of wind and solar output.

The variability uncertainty can also cause uncertain power flows which can affect the certainty and the financial transmission rights markets. Variable resources can impact the amount of operating reserve required or the supply of operating reserve and therefore impact prices and the scheduling of those ancillary services. And then finally, variable energy resources can cause a greater need for flexible resources or operational flexibility from the resources and that may or may not be incentivized in the current market design and may require some changes in order to achieve that flexibility. Next slide.

So this is conceptual view but one of the things that we may be seeing with the reduction in energy prices due to the fact that a lot of the resources that are being added to the grid have lower variable costs or lower operating costs, that the amount of revenues going through the different product areas may be shifting as well. And from looking at the table before, maybe because of that reduction in energy prices we may see more of the share coming from capacity markets or ancillary service markets. A lot of that will depend on what technologies are coming in, what's their share, what's the greatest need that we have in insuring that electricity can be delivered to customers. Obviously demand response and energy storage, how much they get adopted can impact that share as well. Next slide.

Ok. So we've put together a report at the end of 2016 that was a very comprehensive review of the different initiatives going on in each of the RTOs. And I won't go through all of these but I can just say that we catalogued around 150 different initiatives just in the seven US ISOs that were fairly significant in scale as far as their impact to the evolution of electricity markets. So number that are sort of mutual, very similar across the ISOs you can see on the left-hand side, some of those that multiple regions are all looking at improving or modifying their design. And then those on the right which are very unique.

Maybe one ISO has looked at making this change in isolation. And so, a lot of them on here. I put some of the important ones on. And then those in bold they're in place because of the fact that the ISO is seeing a change in their resource mix whether that be greater wind and solar power, greater renewable resources or maybe greater amounts of natural gas on the system. Or maybe there's other technologies like energy storage, demand response that are also affecting that market design.

And once they start being added onto the ISO system in great numbers there may be some changes to the market design that are necessary in order to maintain reliability, ensure economic efficiency, ensure incentive compatibility or revenue adequacy or all the other things that markets are in place to ensure when those resource mixes changes that we can adapt and make sure that that market design is evolving along with the resource mix. Next slide.

Ok. So I just wanted to get a few examples and may be running low on time so I'll probably go quickly through these and then we can have some time for the Q&A. Just wanted to mention a little bit about the western energy imbalance market. That's being operated by the California ISO. There are currently six utilities participating. Five more are planned in the next I think four years and maybe even up till 2021. I forget the latest. But the California ISO has been evaluating the benefits in terms of economic efficiency as well as in terms of other metrics like emissions reductions.

And you can see on this chart here this is looking at the overall savings from each of the utilities that are participating in the imbalance market and the anticipated savings that they've seen from participating there. So significant benefits for all regions and then collectively as well from participating in this market. So this is a real time only dispatch market where assessing energy can be traded across each of these utilities and the ISOs managing transmission congestion across those utilities. And things like flexibility are being managed as well to make sure that each of the areas have sufficient flexibility in the near term. Next slide.

Jeff Logan: Quick clarifying question, Erik. Can you please give us the units for those savings in the table?

Erik Ela: Oh yes. Sorry. Those are millions of dollars I believe.

Jeff Logan: Per quarter, yes. Thank you.

Erik Ela: Ok. This slide is a little bit busy. I apologize for that. But one of the other, one of the other interesting evolutions that we've seen in California and in some of the other areas is around insuring operational flexibility both in terms of the short term as well as the long term. So first part is short term ramping products. We've seen – I don't know if there's some kind of –

Jeff Logan: Sorry. It's advancing by itself.

Erik Ela: I'm not sure why that is. Ok. But really, I'll just talk about this a little bit and I'm not sure why it's doing that. But there may be some kind of other part in here. But both MISO and California ISO have introduced short term ramping products very similar to reserve products. They make sure that there's enough flexibility in the short term in order to meet variability and uncertainty impacts of the net load, both load and renewables. And MISO implemented this in May of 2016 and California introduced this in November of 2016. So very similar to reserve products. They're looking at the short term.

Alternatively, California ISO has also introduced a product on the long term. They call it flexible capacity. So this product is more for ensuring sufficient flexible resources are installed in the planning timeframe. So making sure that in the next year, there's enough flexible resources in order to meet the flexibility requirements that they might have for the entire year planning period. And really this is done by ensuring that there's a must offer obligation for those flexible resources to offer their flexibility into the energy markets. And that's been implemented since 2014 and that goes on an annual basis. So these are very interesting new designs. Flexibility wasn't always – something that I think the ISO has always needed but never really had that explicit pricing and sufficiency requirements. And now in some of these areas that has been more of a design to make sure that there are incentives and sufficiency tests to make sure that the flexibilities there are both in short and long term.

So Jeff, I think with that maybe I'll end since we have enough time for the Q&A. I just had what I think are the greatest R&D challenges around market design. So a lot of these I've talked about revenue sufficiency, a need for flexibility. Go forward, how essential reliability services are being incentivized. And then the next slide, and feel free to just go through. What is the right price? That's a reticular design change. How can the market function properly with new policies that may favor technologies for reasons that the ISO doesn't have authority over, cost or reliability. How changing resource mixes impact electricity markets and then simplicity versus complexity.

For a lot of the areas, a lot of the counties that are starting new market designs, I think they're aware that these can become very complex very quickly. And so, once you start looking at the specific details of how the power market works and how you incorporate the physics into that electricity market, they become very complex very quickly such that it is a large learning curve in order for stakeholders to really understand how prices are calculated and how schedules are determined, etcetera. So those are really I think the top R&D needs in electricity markets. And I think I'll close on that and look forward to any Q&A.

Jeff Logan: Ok. Thank you very much Erik. That was a vey interesting talk. So before we open it up for questions, I just wanted to note to everyone that we will be posting both these presentations and a recording of this entire webinar on the 21st Century Power Partnership website so please keep an eye out for that. And let me turn now to several questions that were submitted. The first one was for David Palchak during the India presentation. And the question was is it true that battery storage did not add substantially to fuel balancing of renewables and fossils in the study that David talked about and shouldn't it help solar during the nighttime or in cloudy periods to have that battery storage?

David Palchak: So you're correct in that we didn't see a huge impact from the batteries. And that is not uncommon for other systems that we've looked at where the renewable energy penetration is around 20 percent. As we go up in renewable energy, there might be more value for batteries as more balancing is needed. But as it was essentially that resolve is telling us that there's a lot of flexibility already in the system and that is kind of taking care of that balance of fuel between the day and the evening.

Jeff Logan: Ok. Great. Thank you for that one. We have another question submitted regarding China and the question is – and this is related to curtailment of renewable energy. The question is has China considered new kinds of industrial development in areas that have excess renewable energy? And by that he means or she means businesses that could operate intermittently and take advantage of the periods when there's excessive and basically free renewable electricity.

Female: Yes. So in those areas where access or high curtailment rate of renewable energy, there is also a reform or a restricting in the industry there. So previously we have mostly some large energy consuming industries located in the western part of China. And as the economic slow down goes, the power consumption of those companies goes [inaudible]. So we have readily seen a shift from those high-power energy consuming industries towards more high-tech industries, for instance like data centers. They consume energy but they are more high tech involved. So there is a transition or restructuring of the industry in these areas.

Jeff Logan: Thank you. Very interesting. I heard that there's some activity and some activity related to bit coin production and mining in China that probably does take advantage of that excess renewable electricity. Thank you for that. The next question is for Erik Ela. And it is actually a two-part question. Has there been interest by the power marketing administrations in the west in participating in the western energy imbalance market. That's the first part. Do you want to take a shot at answering that Erik?

Erik Ela: So I think that's referring to mostly Bonneville Power Administration. I know that there – I don't want to speak on behalf of them so I can only talk a little bit about what I've heard. But I think that there's a pretty strong interest that we've seen over the last few years from many of the utilities in the western interconnection. I think that there's often some challenges with the current requirements for sort of the jurisdictional requirements and sort of who represents the board on any organized market that's more than just California ISO.

And that's certainly been a challenge for I think other states is how much the state would represent within that. So I think that there's certainly interest from multiple organizations. WAPA, the Western Area Power Administration, they've already been a part of the group that's looking at potential membership in SVP. In fact, part of WAPA is in SVP. So I think there certainly is interest.

Jeff Logan: Very good. Thank you for that, Erik. The second part of the question relates to the duck curve in California and I think many people know about the duck curve. It shows the net load that generators must meet after the variable renewables have been subtracted out. And the duck curve by it's very shape represents steep responses that are needed to keep the system in balance. And I'm just wondering – people have been talking about the duck curve for quite a few years now and I'm just wondering if you think that California is taking the right, the appropriate steps to make the duck curve something that's of less concern going forward. Or will it remain a serious issue?

Erik Ela: Yeah. I think that a lot of the changes in trying to incentivize flexibility both in the short term and the long term a lot of that is to really mitigate that duck curve both for the evening ramp up as well as the midday minimum generation issues. So I think that they've been looking at that. They've been making some changes in terms of lowering the price floor to allow it to go further negative when resources aren't responding, when you have minimum generation problems. And there's been some significant changes that have gone over the last few years to try to adjust that.

Jeff Logan: Ok. Thank you very much. We have time I think for one more question and this is a cross cutting question for all of the participants and it's a fairly general one so you can answer it at whatever level you'd like. But it is so what is the most challenging aspect of integrating renewables in your jurisdiction. So I'll start, I'll ask the Chinese guys to begin thinking about that. I know you probably will discuss it amongst yourselves a little bit before chiming in. But maybe we could start with David Palchak to hear from their work in what is the most challenging aspect of integrating variable renewables there?

David Palchak: So in India this is going to be a little bit separate from what I had talked about. But in India there's a lot of worry about the financial health of distribution companies. And essentially, they don't have enough money to pay for the power that they're buying and renewables aren't helping their situation and they're not able to become revenue neutral in any way. So that's kind of the big financial challenge. And there's a lot of schemes from central government to try and take care of that.

Operationally, the biggest challenge is probably looking at individual space act as individual [inaudible] and they have a very hard time coordinating across those states. A lot of cases they just don't want to do it politically. In other cases, there's just not the mechanisms in place for them to do it well. So from a technical standpoint that would be the biggest things that states need to work on coordination. A lot of them know that they need to work on it. It's just politically it's challenging.

Jeff Logan: Great. Thank you, David. Appreciate those insights. And China do we have any remarks on that question?

Female: Yes. We believe 70 of the problem may be political and 30 percent may be technical. On the political side, we believe the problems mainly exist between the provincial barriers because there is a significant amount of local protection that's been going on. Considerations for local development and GDP growth and then local employment in many times triumphs the benefit of environmental and then clean energy. Some provinces there might be some technical barriers regarding transmission congestion or regarding local consumption issues. But mainly the problems are with political.

Jeff Logan: Thank you very much and I appreciate those comments. California, Erik, do you have any quick remarks on that? We're just about out of time.

Erik Ela: Yeah so, I'll go quickly. And just I don't work for the California ISO so I can only speak to what I hear or across the US I think that there's different challenges across the different ISOs. I do think that market design is a challenge. And then also diversity. I think that a lot of the challenges that California has that's different from for example what ERCOT sees. ERCOT has a large penetration of wind power, is the fact that a lot of the solar in California is it's happening, it's peaking at the same day. It's all reducing at the same time.

And having some more diversity, having diversity across renewable technologies, diversity across geographical locations. I think that that helps a lot in integrating. And so that's one of the benefits of the expansion of the energy imbalance market is to increase that diversity. But market design similar to what David said is also a large challenge in being able to make sure that we're incentivizing for the things that we need and making sure that the resources that we do need have that revenue in order to remain on the system.

Jeff Logan: Ok. Great. Thank you very much Erik. And with that I will call the webinar to an end. Again, we'll be posting all three presentations to our website as well as a recording of the webinar itself. I want to thank very much each one of the panelists who participated and spoke. And with that I'll also want to thank everyone who called in to attend this webinar. Any other questions, you can reach us at the 21st Century Power Partnership website and we'll try to get back to you as soon as we can. And with that I will close the webinar and thank you again all for joining. Goodbye.