California’s Wind Market Has All But Died Out. Could Grid Services Revenue Help?

Source: By Justin Gerdes, Green Tech Media • Posted: Tuesday, March 31, 2020

Wind farms can do more than just pump out electricity. Even so, the market for new projects faces strong headwinds in California.

In tests conducted at the Tule wind farm in San Diego County last year, California’s grid operator determined that the project could provide essential services to the grid. The ability to provide those ancillary services could make it easier to add variable renewable energy sources to the grid, according to the California Independent System Operator (CAISO), which published a report on the research project this month.

The 131-megawatt Tule project, which is operated by Avangrid Renewables, is equipped with an inverter-based smart controller that sends signals to all 57 turbines in the project, allowing them to operate as a single plant.

The tests determined that ancillary services typically provided by natural-gas generators, such as voltage regulation control, active power control and frequency response, can be supplied by a commercial wind farm outfitted with a plant-level controller.

“This means wind can be another way to inject stability into the grid from renewables sources and to create commercial paths for incorporating rising amounts onto the grid,” Clyde Loutan, report co-author and renewable energy adviser at CAISO, said in a statement (PDF).

CAISO conducted the tests in partnership with Avangrid Renewables, the National Renewable Energy Laboratory and General Electric, the plant’s turbine manufacturer. Previous CAISO-led tests had already established that utility-scale solar PV plants can provide grid services.

Getting the economic incentives right

Don’t expect an immediate rebound in California’s once-booming but now long-dormant wind market.

In an interview, Loutan explained that the prevailing policy and economic drivers in California don’t necessarily align with a wind farm’s ability to provide grid services.

California’s 60 percent renewable portfolio standard for 2030 “means 60 percent of the load served for the whole year needs to be from renewables. It incentivized development and energy load-serving entities such as PG&E and Southern California Edison to write the contract in such a way that they maximize production,” Loutan said.

The question is whether wind farm operators could make as much money providing grid services — by curtailing production in some instances — as they would from simply generating as much power as possible.

“If the price is right, then I think a wind plant or a solar plant may be willing to forgo some production, so they’re not really losing money,” Loutan said.

California’s stalled wind energy market

California was once the leading U.S. state wind market, but it was long ago overtaken by Texas and now ranks fifth in total installed capacity, behind a number of much smaller Midwestern states.

While California’s installed wind capacity stands at an impressive 6 gigawatts, it’s added just 750 megawatts of new or repowered capacity over the past decade, according to Nancy Rader, executive director of the California Wind Energy Association (CalWEA).

Why has so little new capacity come online in recent years? In an email, Rader cited the difficulty of developing projects at optimal sites in California.

“Land-use restrictions outside of the major existing wind resource areas [largely in the California desert as a result of the Desert Renewable Energy Conservation Plan] made it very difficult to develop wind projects in California,” Rader said.

Some 4,000 megawatts of in-state wind projects are waiting in California’s interconnection queues, and 2,500 megawatts of additional in-state wind capacity is included in the California Public Utilities Commission’s integrated resource plan. But building anything near those numbers will be difficult “without stronger state leadership or a change in public attitudes,” Rader said.

Nearly all of the best sites for wind farms on federal land are off-limits for development, according to CalWEA.

Wade Schauer, Wood Mackenzie’s director for Americas power and renewables research, noted that “several counties, including Los Angeles, San Bernardino and San Diego, have passed restrictions discouraging or banning development of large-scale commercial wind farms.”

Beyond project siting, resource availability is another challenge for the industry in California, said Danielle Osborn Mills, the American Wind Energy Association’s director in California.

“While some new projects have come online, like Tule Wind [in 2017], many of the best wind resource areas in California have either already been developed or have state or local prohibitions on new development,” Mills told GTM.

Wind developers targeting California’s power market have increasingly looked to build projects in states such as New Mexico and Wyoming. There’s also growing attention to the prospect of California offshore wind farms.

A wave of energy storage on the horizon

If California wind farms were equipped to provide grid services — and were compensated for doing so — could it help to revive the state’s onshore wind market? The answer seems to be maybe.

The right kinds of market changes made through CAISO or the California Public Utilities Commission that recognize the grid services that utility-scale renewables can offer “could enable more procurement of renewable generation,” said Mills.

Still, it’s not clear that any additional revenue would be enough to make up for losses in energy sales.

Going forward, batteries are more likely to be used to provide grid services, said WoodMac’s Schauer. “Batteries are going to be able to provide all of those grid services, and a lot of batteries are going to be built over the next 10 years.”

As California grapples with ever-growing amounts of renewable energy, results from CAISO’s tests suggest that wind farms could be assessed on their ability to provide grid services as well as bulk power production.

“What we’re going to be looking at is, if you’ve got two identical plants, one could provide essential grid services and one cannot, and you have to curtail one. You’re going to want to keep the one on that can provide these services and curtail the one that cannot provide them,” said CAISO’s Loutan.

Importantly, the Tule wind farm tests also make clear to policymakers and planners that existing utility-scale wind and solar power plants can compete with incumbent thermal generating units to supply grid services.

“If we need essential [grid] services, we have two choices. […] A wind plant or solar plant may be able to provide them, or the alternative is to commit a carbon-emitting resource to do the same thing,” said Loutan.