1. Imperial College Centre for Energy Policy & Technology Power System Reserve Requirements and Costs with Intermittent Generation: A Revisit of Statistical Principles Seminar at Open University Dennis Anderson January 24, 2006

2. Questions discussed 1.What are the required additions to reserves? 2.What is the implied capacity credit? 3.What are the associated costs of (a) reserve capacity? (b) balancing? 4.How do estimates compare among key UK studies?

3. Basic Statistical Parameters for Capacity Effects Mean values and ranges: Demand100%: ± 5% Thermal Plant 92%: ± 7% Wind Plant 32%: + 68%, - 32% Old Rule of Thumb for Thermal Systems: System margin = (1 +demand uncertainty)/plant availability – 1 = 1.05/0.85 – 1  0.2 to 0.25

4. Statistical principle—thermal system ≈ 4 x s.d. LOLP What happens when σ s rises?

5. Effects of Variance on Required System Margin 4 x s.d.

6. Estimating Required Reserve Capacity Two step iterative approach. Estimate: 1.Frequency distribution of system margin with intermittent capacity on system. 2.‘Conventional’ capacity—e.g. OCGTs or retained thermal plant—required to maintain LOLP at same level as that for a system with ‘conventional’ plant only  additional reserve capacity. Capacity credit can be inferred from this.

7. Results (1)

8. Results (2)

9. Comparison with Other Studies (1) Backup Capacity, % Capacity Credit, % Dale et al18.9 *19.2 SCAR18.3 *22.9 Carbon Trust21.2 *20.0 R. A. Eng.65.0 ? Present study19.1 22.1 * --------------------------------------------------- Inferred from Backup capacity = CF/A – CC (CF = Capacity Factor; A = availability of conventional plant)

10. Comparison with Other Studies (2): Costs p/kWh of Wind Capacity Balancing Other Total Dale et al0.32 0.25 0.08 * 0.65 SCAR0.26 0.22 ? 0.48 Carbon Trust0.45 0.20 ? 0.65 R. A. Eng.1.86? ? 1.86 ** Present study0.43 0.25 *** 0.05 0.73 ---------------------------------------------------------------------- Other = expected incremental energy cost of using reserves * Inferred from their results ** Appears to exclude balancing costs *** Upper limit of other studies All converted to 10% discount rate

11. Conclusions (1) 1.Importance of System Simulation Studies 2.Reasonable agreement between studies on balancing costs 3.Most studies in reasonable agreement about (a) capacity credit (≈ 19- 23 %) (b) reserve requirements (≈ 18-21 %), and hence: (c) costs of intermittency (≈ 0.5 to 0.7 p/kWh) 4.Capacity credit: a useful rule of thumb for monitoring adequacy of system margin. As % peak demand: Margin = ‘Conventional’ capacity + CC – 100

12. Conclusions (2) 5.The Cold-Snap-No-Wind Scenario, with 20% market share: conventional capacity on system would be around 110% of expected peak demand with 20% backup of wind 6.Cost criterion for investment in intermittent generation: Capacity costs ≤ Value of capacity credit + Fuel cost savings + Balancing costs 7.Is intermittent generation ‘firm’ at low market shares? 8.Importance of a permanent institutional arrangement to undertake research on, estimate and monitor reserves.