Smart Grid creates an Over-the-Counter Market for Energy Sales

As policy makers seek to integrate a serious sociological and environmental issue into energy production, the typical utility is faced with not only technology upgrades, but also dealing with new systemic events that occur far beyond its franchise borders. Adding renewable energy resources into the existing bulk generation power system can be accomplished through a smarter power grid when the integration includes complex, end-to-end control strategies and consumer incentives to participate. Application of renewable resources will provide environmentally clean, and eventually, cost effective energy alternatives to the existing mix of electric generation assets. An even more interesting consideration is that integrating distributed energy resources (DER) will likely become the normal state, as siting transmission becomes more challenging. DER requires addressing facets of both the underlying analog-centric electrical power system and the nascent digital-centric information infrastructure. As smart grid develops, integration and optimization of grid control logic are areas that stand as key enablers to a rapid growth of renewable generation. This paper presents a serious discussion of the impact significant renewable energy generation can wage against the existing power system and how sophisticated smart grid control elements can address its integration into distributed energy systems. Technology addressing these concepts is under development now by General MicroGrids’ Microgrid research and development program in San Diego California. Keywordssmart grid, microgrid, distributed generation, renewable energy, control, integration, information technology 1. MOTIVATING CONTEXT The energy market in the United States is going through an evolution. For example, California Governor Arnold Schwarzenegger issued Executive Order S-14-08 on November 17, 2008 which requires that 33 percent of the electricity sold in California come from renewable energy resources by 2020. In the last few years, emphasis has focused on renewable energy resources as a potential solution. New large wind farms throughout the state and solar farms in the desert areas have been contracted by major utilities to address their increased energy requirements as well as regulatory obligations. A further anticipated proliferation of these large scale wind and solar power generation farms has the potential to substantially improve the achievement of both state and upcoming national climate legislation. However, these renewable power types create variable generation determined by prevailing meteorological conditions. Whereas large scale, bulk storage of electrical energy is problematic and expensive, application of novel distributed control mechanisms has the potential to address the volatility issues associated with wind and solar power generation in a cost effective manner. A secondary, yet equally important concern is that construction of large-scale long distance transmission power lines to move power from remote bulk renewable resources into the urban areas that comprise the load centers has also proven to be problematic. Transmission is expensive to build, environmentally sensitive and politically unpalatable to the local communities and regulatory bodies. Addressing the sociological and environmental movement towards clean energy has brought new power quality concerns to the current electric power system. Regional policies that mandate high levels of renewable energy standards (RES), such as California and the Northeast, are struggling to find technical solutions to manage power system control. Power quality distribution problems have been caused by the fact that areas with rich renewable potential are very distant from their major load centers. Often, they are hundreds of miles apart, either in other states or regulatory regions. As of December 2009, 35 states required utilities achieve between 5% (AZ) and 38% (MA) renewable generation mix by 2015. These states and regions are in danger of creating significant power instability on large transmission systems. Through rapid adoption of bulk renewable generation, these instabilities could soon become a national issue. President Obama has made the national RES a cornerstone of his energy strategy – advocating that 25 percent of our electricity be generated from renewable sources by 2025. The technical difficulty becomes one of how to quickly reduce aggregate demand, or conversely, increase distributed generation in real time as bulk wind or solar drops or peaks. Through the introduction of an enterprise-wide control system, placed between the bulk power grid and the distributed energy resources, customer owned assets could collectively stabilize the frequency and voltage swings witnessed on the bulk transmission system. Customer energy management is not a new concept. It is already used by network operators in a number of situations such as load shedding in emergencies, frequency control in autonomous grids containing renewable energy units, and it has been investigated as a means of providing voltage control in distribution networks with high level of distributed generation. In addition, the California Independent System Operator (CAISO) has developed a Proxy Demand Response and Participating Load concept that allows integration of utility renewable resources into the California wholesale energy market. It is entirely feasible to incorporate large end-use energy participants as additional resources of renewable energy and potentially offer them revenue. 2. DER BENEFITS AND RISKS