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Integration Cost of Variable Generation

What does it cost to integrate a variable generation resource such as a wind turbine or photovoltaic array into the transmission system? The question seems simple. But calculating a cost is surprisingly difficult. In fact, to date, it has not been done in a satisfactory manner.

The difficulty is in establishing what conditions to compare and in the interactions among generation resources. Wind and solar integration costs cannot be measured directly. Instead, total power system costs with and without wind and solar generation must be compared. Fuel savings naturally dominate any total cost comparison of wind and solar with conventional generation.

Integration costs are not limited to wind and solar energy. Nearly all generators impose costs when they are added to the transmission system. However, these are seldom considered integration costs and applied to conventional generation. For example, large generators impose contingency reserve requirements (for power in case they fail or must be taken offline). But the cost of maintaining these reserves is not assigned to the generators that cause the need. Instead, the costs are shared among all generation. Therefore, current practice has the effect of subsidizing large generators at the expense of small generators. Other examples include block schedules that increase regulation requirements, fuel scheduling restrictions that impose system costs, immovable baseload plants that increase cycling of other baseload generation, and generators with high minimum output levels that create minimum load reliability problems. But none of these costs is allocated to the generators that impose them on the power system.

Any policy that assigns integration costs to wind and solar resources should not discriminate. Generation integration costs are typically shared because the benefits are also shared. Contingency reserves are shared within a large reserve-sharing pool because aggregation reduces the physical reserve requirement and therefore everyone's costs. Variable generation sources bring fuel diversity, price stability, energy security, and environmental benefits that accrue to all users of the electric power system. Variable generation integration costs could similarly be broadly shared or, at minimum, assessed based on performance, not generation type.

NREL is addressing integration cost issues on the transmission system. For more information, see: