2/21/2013 Elise King, CSL Communications
Written by Elise King, CSL Communications
The National Science Foundation has awarded the University of Illinois at Urbana-Champaign and the Massachusetts Institute of Technology a four-year, $700,000 research grant to address the impact of a modernized, reliable smart grid on energy price volatility and energy markets.
According to the NSF website, “without careful crafting of its architecture, the future smart grid may suffer from a decrease in reliability. Volatility of prices may increase, and the source of high prices may be more difficult to identify because of undetectable strategic policies.”
Sean Meyn, the principal investigator of the research project and a research professor at the Coordinated Science Laboratory at U. of I., said there are two main parts to the project.
The first part deals with how to manage the complex system of energy use. “We have done a good job up to now,” said Meyn, but he questions how we will create a sustainable energy infrastructure in the future.
Creating a sustainable energy infrastructure means that we will be getting more of our energy from wind, sunlight, waves, etc. However some of these sources of energy, such as wind, can be unreliable. What would happen if there was no wind for five days? Or what would happen if there was suddenly a gust of wind? “We believe we can create ways to absorb this volatility, to make renewable energy resources practical,” Meyn said.
The project not only deals with the volatility of energy sources, but also the volatility of energy prices, which leads to the second part of the project: how to make energy markets work.
Price volatility has been a recent problem that has affected the Midwest, as well as states such as California and Texas, and this problem can have great societal and political consequences. “Explaining this problem is my favorite part,” Meyn said.
For example, in August, Texas experienced a heat wave that “produced two periods of very high wholesale prices in the Electric Reliability Council of Texas (ERCOT), the wholesale market operator for most of the state,” according to the U.S. Energy Information Administration.
Wholesale prices repeatedly spiked to $3,000 per megawatt hour, the market cap price, and ERCOT set an all-time peak demand record. Fifteen-minute set prices between 7:00 a.m. and 2 p.m. averaged only $45 per megawatt hour, but then between 2 p.m. and 7 a.m. they averaged $1,937, according to the U.S. Energy Information Administration.
Energy price volatility in Tasmania in 2007 was even more extreme: prices fluctuated from negative numbers (meaning that it was actually costing power companies to run their generators) to $20,000 per megawatt hour.
Meyn believes that current market structures do not work. “There are no incentives for moving us toward a sustainable future. The markets do not provide the right reimbursements to generators for their services," he said.
This is why researchers aim to develop a smart grid that is reliable and can better monitor our energy use. The development of this new smart grid will also help create equilibrium between both the suppliers and consumers in the energy market.
The grant, titled “CPS: Medium: Collaborative Research: Smart Power Systems of the Future: Foundations for Understanding Volatility and Improving Operational Reliability,” began on Oct. 1; however, Meyn said that CSL’s work in this area actually started ten years ago. “We have a series of papers now, and a book chapter, explaining why highly volatile prices can be expected even under the most ideal assumptions,” Meyn said.