Forecasting for Dollars

Forecasting for Dollars

May 27, 2009

Bill Opalka
Editor-in-Chief
Energy Central

It's 5 a.m. on a Monday and operations at the Puget Sound Energy trading desk are heating up. Actually, like utilities everywhere, the Bellevue, Washington, operation is never quiet. This flurry of activity is repeated from coast-to-coast as the desks gear up for that day's trades, and in this case, as the company's power generation bids are prepared for the day-ahead market.

Expected production from thermal and hydro units are calculated along with the crucial weather forecast and its projected impact on the anticipated load. And one other thing has arrived, a piece of the puzzle that wasn't needed a decade ago: a detailed model of the expected production from well over 200 wind turbines spread over two separate wind farms PSE operates scores of miles from its load centers on the outskirts of Seattle. When bids are awarded, wind is part of the equation. The real-time market then operates as it does on any other given day, with generation sources, not just wind, falling on and off the system for unplanned outages.

Gone are the days that a wind forecaster described the energy as an "if it's there, we'll take it" source to one that gives energy traders and planners some confidence of hours when wind can stand on equal footing with more expensive coal and natural gas units. Now, these models are giving power companies a leg up with their power portfolio predictions, not just knowing if the wind might blow strongly enough. What the planning means, for example, is that traders may be told a wind plant in their area has a 90 percent chance of delivering 200 megawatts of electricity to the grid at 6 p.m. on Tuesday. Managing that risk of a 10 percent absence of wind -- possibly with a backup hydro or natural gas plant -- is already in a day's work.

"This has become very important because we're saving costs from not using any fuels and we're also getting the value of the production tax credit (2.1 cents per kilowatt-hour)," said David Mills, PSE's director of energy supply and planning. "Without this precision, it would be a lost opportunity."

As it is, two wind farms total 386 megawatts in its portfolio. Equivalent to a typical coal plant, the amount of energy is no longer trivial. And with the equivalent capacity of two or three more coal units coming on line from it its expanding wind portfolio in the next couple years, the share of renewable energy -- and its availability -- are occupying an even more important place in trading operations.

The Bonneville Power Administration, for example, may have 4,300 MW of wind in its balancing area by the end of 2011, the largest such concentration in the country. Also, consider that on February 18, the New York Independent System Operator had more than 1,000 MW at 6 p.m., or 12 percent of load, the largest penetration of wind ever on its system. Xcel Energy, furthermore, the largest owner of its own generation, once had 35 percent of load in Colorado supplied by wind.

"With the wind profile it could be the most cost-effective generation in off-peak hours," said Eric Pierce, Xcel Energy managing director of energy trading.

Flip Side

But the flip side: swings of 500 megawatts of wind can disappear from a system in an hour or less, creating scheduling havoc for system operators, as it did in Texas in February 2008. The system operator relied on interruptible contracts with industrial customers to retain reliability in that event. Dramatic events impact reliability and wild swings do also. Maximum change in Colorado over a 24-hour period was 743 MW increase and a 485 MW decrease. Minnesota saw a 517 MW increase to a 488 MW decrease, Xcel's Pierce said.

While generation swings downward create operational challenges and price spikes if the utility needs to enter the spot market, upward pressure on generation could cause transmission bottlenecks. "We have the ability to anticipate generation and bypass the potential logjams in transmission," said PSE's Mills. One benefit the system has in some seasons is the ability to integrate hydropower into the system when the wind dissipates and the water resource can be ramped up in minutes.

"There's a tremendous amount of money to be made by generators if they have a reliable forecast that allows them to operate in the day-ahead market. The nature of wind is that there is less opportunity for them to bid into the shorter interval markets," added Pascal Storck, president of global operations for 3TIER, based in Seattle. The firm is approaching 10,000 megawatts across the country where its forecasts are used by its clients.

One issue that wind forecasters and plant operators concern themselves with is a ramp event, a relatively quick increase or decrease in wind speed in an area that can add or subtract possibly several hundreds of megawatts from a system in a short period of time.

If the renewable energy is produced in geographically diverse areas, clouds or low wind speed at one site may be mitigated by weather conditions so the total impact is less. For wind generators, larger areas are seen as mitigation for intermittency: if one wind plant is still, another even a couple hundred miles away but in the same multi-state transmission system might be operating close to capacity. The large area of the Midwest Independent System Operator, with its 13 states and one Canadian province, is one model wind generators see as benefitting the resource and one that makes integration easier.

As wind energy matures, the mechanisms to forecasts its predictability are also advancing. Getting it right is getting to be big business.