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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 solar photovoltaic array into the transmission system? The question seems simple. Unfortunately, it is not—calculating an integration cost is surprisingly difficult. In fact, it has yet to be done in a satisfactory manner.

The difficulty is in establishing which conditions to compare and in determining the interactions among the various generation resources. Adding to the complexity is the fact that 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, nor are the costs restricted to just variable generation. Nearly all generators impose costs when they are added to a transmission system. For instance, large generators often impose additional contingency reserve requirements (in case of sudden failure). Interestingly, the cost of maintaining these reserves is not assigned to the generators that cause the need. Instead, the costs are shared among all generation, creating a situation where the generators that create the need are subsidized at the expense of smaller generators, with the rationale being that the overall system benefits from the addition of the large generators and the increased contingency reserves.

Other examples where the costs incurred by a particular generator are shared throughout the system include block generation schedules that increase regulation requirements, fuel scheduling restrictions that impose system costs, immovable baseload plants that increase cycling of other generation, and generators with high minimum output levels that create minimum load reliability problems.

In contrast, variable generation, although it also benefits the greater good (by providing fuel diversity, price stability, energy security, and environmental benefits), is typically assessed by the costs associated with its addition.

NREL is working to address these and other integration cost issues and is serving on a technical advisory committee for a study sponsored by the Western Interstate Energy Board to help increase understanding. For more information, see: