Integrating Variable Renewable Energy with the Grid An Approach

Integrating Variable Renewable Energy with the Grid
An Approach
Disclaimer: The views and analyses represented in the document are excerpts from a detailed report prepared by
Mercados Energy Markets India Pvt. Ltd. (AF‐Mercados EMI) supported by Shakti Sustainable Energy Foundation
(Shakti). The views and analyses represented in the document do not necessarily reflect that of Shakti and Shakti
accepts no liability for the content of this document. Further, Shakti and AF‐Mercados EMI do not accept any
liability for the consequences of any actions taken on the basis of the information provided.
Integrating Variable Renewable Energy with the Grid
An Approach
Excerpts from a report supported by
Shakti Sustainable Energy Foundation
and prepared by
Mercados Energy Markets India Pvt. Ltd.
March 2013
Table of Contents
Background: India's Energy Realities
The Challenge: Integrating Variable Renewable Energy (VRE) Efficiently
2.1 Short‐Term Issues
2.2 Long‐Term Issues
The Solutions: Smart Imperatives for Integrating VRE with the Grid
Implementation Roadmap
Background: India's Energy Realities
India's substantial and sustained economic growth is placing enormous demand on all of its
resources and demand for electricity has been
growing on a fast rate, and consequent deficits in
Figure 1: All‐India Peak and Energy
supply. In addition to pervasive shortages, about
Deficit – 2011‐12
40% of the population does not yet have access.
Excessive dependence on fossil fuels and limited
domestic availability has resulted in close to 30 GW
of stranded generation capacity. Further,
increasing reliance on fuel imports has led to a
severely adverse Balance of Payment situation that
has contributed to a steep fall in the value of the
rupee. India continues to experience power deficit
in terms of energy and peak demand requirements
which leads to indiscriminate load shedding or
over‐drawl from the grid, causing instability and
security concerns.
Increasing demand for electricity and supply deficit
also has commercial implications and contributes
to the rising price of electricity. The condition is
particularly severe in the Southern Region (SR)
which is impacted by transmission congestion. While the average price in the rest of the country was
Rs. 3.50 per kWh during 2011‐12 and Rs. 3.78 per kWh in 2012‐13, the price in the Southern Region was
Rs. 5.12 per kWh and Rs. 7.95 per kWh respectively. Figure 2: Average RTC Prices in Southern Grid in
The situation further gets exacerbated in the Southern Region grid during the non‐wind months
wherein due to low wind generation the prices in the Southern Grid become exorbitantly high. As is
indicated from Figure 2, the average price for Southern Grid during March 2011 (low wind) was Rs.
10.41 per unit whereas in July 2011 (high wind), it was Rs. 5.30 per unit. Thus, renewable generation
could and shall play a critical role in
determining electricity prices in short
Figure 2: Average RTC Prices in Southern Grid in 2011‐12
term day‐ahead electricity markets.
The potential impact of renewable
power production in reduction of
electricity prices, ability to reduce inter‐
regional congestion and improve
availability of energy has led to an
increasing interest in and deployment of
large‐scale renewable energy.
Prices indicated here are for the S1 region of the Southern Grid comprising Tamil Nadu and Andhra Pradesh.
Prices in the rest of the Southern Grid are typically in close alignment with S1 prices.
2. The Challenge: Integrating Variable Renewable Energy Efficiently
Variable Renewable Energy (VRE) resources like wind and solar present enormous opportunities to
meet India's energy deficits in a cost effective manner, but also present very significant challenges
on account of their intermittency, making load and grid management complex. Such intermittency
emanates from two main aspects ‐ variability and unpredictability.
Variability of VRE can be addressed through long term developments in storage, balancing and
spinning reserves and also by making demand more responsive through price signals.
Simultaneously, the challenge is to make the renewable energy more predictable, thus significantly
offsetting the impact of intermittency. This means that better forecasting is required in order to
allow system operators to schedule or plan how the energy can be used to help match the demand
profile and also plan for any system support in the form of ancillary services. Robust processes for
forecasting, scheduling and dispatch can help efficiently manage the physical operations of the grid
and also financial settlement processes, including through the Renewable Energy Certificates (REC)
This report bases its principal conclusions on the analysis of experiences in Tamil Nadu (one of the
Southern states of India) and in the Southern Grid in India. Figure 3 below provides an illustration of
variability of wind generation in Tamil Nadu between months, and also between consecutive days in
the same month.
Figure 3: Wind Generation in Tamil Nadu during 2011
In supply strapped power systems such as India, variability of supply as well as demand is often
managed through load shedding, but this cannot be a sustainable long term solution. In any event,
shedding load has its limits and leads to adverse economic impact, both direct (use of inefficient and
high cost back‐up generation and storage) and indirect (severe loss of productivity).
The impact of integration of VRE on the power system can be categorised in short‐term and long‐
term effects. The short‐term effects are due to balancing the system at the operational time scale
(minutes to hours). The long term effects are related to the contribution VRE can make to the
adequacy of the system, which is its capability to meet peak load situations with high reliability.
2.1 Short‐Term Issues
Figure 4 below indicates the decisions that the system operator is required to take in managing the
system effectively.
Figure 4: Challenges faced by System Operator in context of grid integration of RES close to real time
Production from Gas and
Hydro Resources (1-24
Regulating Reserves
(Minutes to Hours)
Transmission and
Distribution Efficiency (124 Hours)
Discarded Wind
(not accepted into
the grid)
Local / System
System Impact
The following sections briefly discuss the operational challenges faced by the system operator in
managing integration of VRE with the grid.
A. Voltage Management
In most of the Indian states, wind farms/generators are connected at the STU level (at 110/132 kV) or
at the distribution level (below 66 kV). Heavy reactive power drawls by these generators, pose
serious voltage management issues, the impact of which is also felt over long electrical distances.
The RE generation varies with the resource availability. This directly affects other generators that
have been connected to the system elsewhere, with the aim of providing balancing and operating
reserve. Unless the variation is balanced quickly, the voltages on the system vary. In cases when the
variations are large, limits may also be infringed. This affects the reliability and stability of the power
B. Real Power Imbalance
Real time balancing of demand and supply to keep the power system “stable” and hence “secure” is
one of the primary responsibilities of the system operator. While uncertainty in demand always
poses a challenge, system operators world‐wide rely on spinning reserves or other real power
support services which trigger into operation within seconds of receiving command from the
system operator. Support of such services however needs to be procured in advance.
When demand cycles through the day, the system operators have a reasonable estimation of supply
requirements and keep such generators ready for operation during the day. However, more than
Most of the wind generator systems currently used in India are induction generators. Squirrel Cage Induction
Generators (fixed speed) are known to absorb heavy reactive power during start‐up and also during normal
operation. Wind generators, during normal operation, may start‐up many times. The situation gets exacerbated
during events of fault, when these machines consume large amounts of reactive power from the system.
This may make recovery from the fault much harder. Solar projects can present similar voltage management
problems due to the nature of output from the solar farm consequent to rapid insolation changes.and
Andhra Pradesh. Prices in the rest of the Southern Grid are typically in close alignment with S1 prices.
variability, predictability of wind with manageable accuracy is a greater challenge than predicting
and managing uncertainty in demand or supply from conventional resources. For a system
operator, extent of “predictability” is of great importance for reliable and secure system operation
– whereby it is able to predict and thereby procure adequate balancing capacities.
It is important to note that size of the power system impacts management of variability. As the
system size becomes smaller, the extent of variation also increases. Because the output fluctuates
in a way that generators cannot control, there is a need for additional energy to balance supply and
demand on the grid on an instantaneous basis, as well as ancillary services such as frequency
regulation and voltage support. The smaller the power system, more is the need for such balancing
resources that can respond within a short time.
C. Commercial Impediments To Real Power Balancing
Real power balancing is a problem for the system operator under two conditions: (a) when there is
an excess (above schedule) VRE generation; (b) when the VRE generation reduces below schedule.
When VRE Generation Increases: Problem of “Discarded Wind” in Tamil Nadu‐ The host utility
where the wind generator is located has no incentive to continue allowing the wind generator to
generate if the Unscheduled Interchange prices are below the Feed in Tariff (FiT). Thus, there could
be instances where the wind generator could be instructed to reduce/stop generation even when
the frequency is below 50 Hz, let alone instances when the frequency exceeds 50 Hz. As frequency
increases and if at the same time wind generation also increases, the utility is faced with an
operational decision which is modulated by financial considerations. When the frequency starts
increasing but is still below 50.2 Hz and the UI rates are lower than FiT rates / contract rates, then
SLDCs may be inclined to back down wind generators, since unscheduled drawal from the grid is
commercially more advantageous. Current UI rules encourage such deviant behaviour.
When VRE Generation Declines ‐ When the wind generation declines and there is fall in grid
frequency, the system operator can, in the absence of balancing reserves in its control area, either
continue to allow grid indiscipline and overdrawal at high UI rates or shed load – both costs to the
consumers in the state. The UI mechanism, with all its advantages, is also proving to be detrimental
to co‐operation between state utilities for offering help in balancing energy in such conditions.
D. Sub‐optimal Coping Strategies
At the State Load Despatch Centre (SLDC) level,
the sudden reduction in VRE based generation can
be balanced by ramping up existing thermal and
hydro resources – if available as spinning reserves
(secondary reserves) or by procuring power in the
short term markets.
Figure 5.1: Wind Generation at TN SLDC
Similarly, thermal / hydro generators have to be
ramped down when there is sudden ingress of VRE
based generation. In general, a number of states have limited options with them to cope with such
The “real time” energy prices in the Inter State Transmission System (ISTS) network are determined through an
imbalance mechanism where the energy prices are regulated and are linked to grid frequency. These are referred
to as the Unscheduled Interchange (UI) prices.
situations. The case in point is Tamil Nadu where
thermal resources are designed to serve constant
base loads; the SLDC is left with rather limited
options to balance load and generation. These
options include: (i) Ramping of tertiary reserves
such as Kadamparai Pumped Hydro Power Plants;
(ii) Load Shedding; and (iii) Heavy UI Drawals. The
above behavioural phenomenon is depicted
through Figures 5.1 to 5.3.
A comparison of actual v/s schedule drawal on 17
August and 18 August (Refer Figure 6) indicates
that probably, guided by the actual drawal on 17
August, TN SLDC scheduled a higher drawal on 18
August. However, because of high wind
generation on 18 August, TN ended up drawing
much less than its schedule. This has commercial
implications as well ‐ Tamil Nadu had to pay for the
scheduled energy but got reimbursed at a much
lower rate for under‐drawal (under the current UI
mechanism, based on the extent of under‐drawal).
Figure 5.2: Geneneration by Kadamparai
Hydro Power Plant
Kadamparai generates more during 1‐13 hours,
reduces generation post 13 hrs. Generation
picks up on 18/08/2011 when wind generation is
lower than it was on 17/08/2012
Figure 5.3: Load Shedding Profile
Lower wind generation on 17/08/2011 is made up
through load shedding
Figure 6: Schedule Vs Actual Drawal of TNEB for 17.08.2011 and 18.08.2011
The following inferences can be drawn from the above:
Procurement of power from tertiary reserves or from short term markets, loss of quality of supply
due to load shedding or UI drawls (which also compromise grid security) – all result in high costs that
have to be borne by the consumers in the host state.
Sudden ingress or withdrawal of VRE generation from the grid would require tertiary resources with
quick ramp rates for balancing. In the above examples, it can be seen that generation from pumped
hydro is one such source with UI being the other. Sudden loss of VRE can be made up by increasing
withdrawal from the grid. The UI mechanism thus provides perverse incentives for grid integration
of VRE based generation, and hence needs to be replaced by a more formal Ancillary Services
Beyond the above costs, the cycling of thermal generators may also impose huge costs on the state
generators, especially when VRE penetration increases– which ultimately is borne by the state
consumers. Here again, two broad types of costs are involved (a) variable costs due to efficiency
loss and (b) increase in life‐cycle costs due to increased wear and tear.
2.2 Long‐term Issues
A. Transmission Capacity Expansion
Integration of VRE generation in the grid requires balancing reserves that ideally should be able to
replace VRE generation when the latter reduces and should have the ability to reduce generation at
a rate which matches ingress of VRE based generation. This requires investment in transmission
capacity (especially because VRE are location dependent and may be far from load centres),
reactive power resources to support the flow of power over long lines and reactive power
resources to support inductive power requirements of wind generators. While transmission
capacity is required to balance the variations in active power output, reactive power resources are
required more “locally” to prevent excessive losses in the grid.
The Grid collapses in July 2012 – while not at all linked or attributed to VRE – highlighted the
vulnerability of the inter‐state network to external events/disturbances. The intra‐state network is
relatively weak, and requires strengthening and augmentation. The augmentation plans need to
specifically be looked from the perspective of integration large scale VRE as well.
B. Generation Planning
With increasing incorporation of VRE into the system, the generation planning will also require a
modified approach. Planning only for requisite MW capacity may not be sufficient for system
adequacy, stability and security, if such generation is not flexible to respond to system variability.
The above calls for incorporation of adequate “flexibility” in the system as one of the planning
criteria besides the MW capacity required in the system.
3. The Solutions: Smart Imperatives for
Integrating VRE with the grid
Figure 7: Smoothening effect of FACTS devices
India's advantage is in learning from global
research and development, which is already
happening in VRE heavy power systems, but
aligning them to the Indian structure and realities.
The Indian power system has several advantages,
including a large, frequency‐integrated grid
(Southern Grid is to be integrated with the rest in
the foreseeable future), a tiered management
system and also a strong inter‐state transmission
backbone. The measures proposed for India need to derive advantages from this structure.
3.1 Voltage Management
Figure 7: Smoothening effect of FACTS devicesGlobally transmission voltage is controlled through a
combination of generator excitation systems, transformer tap‐changers, static reactive devices and
increasingly, Flexible Alternating Current Transmission System (FACTS) devices. FACTS devices
combine modern power electronics and control techniques with capacitors, inductors and
transformers. In the Indian context the most important FACTS device would be Static Var
Compensators (SVC)/ STATCOM. The characteristics of VRE would require voltage stabilisation too
rapid for transformer tap‐changers and too large for many generator excitation systems leaving
FACTS as one of the most suitable option. Figure 7 indicates the smoothing effect of FACTS devices.
In order to encourage investment in such devices there needs to be a mechanism for determination
and sharing of the costs of voltage and reactive power management. Most modern wind turbines
have a voltage or fault ride through facility which improves output. However, regulations and the
grid code would need to be amended to enforce the same for existing wind farms as well. The
existing IEEE Application Guide for IEEE Std 1547™, IEEE Standard for Interconnecting Distributed
Resources with Electric Power Systems could be adapted for India.
Currently older and less efficient wind turbine generators are considering repowering their turbines
in order to improve efficiency and plant load factor. Repowering should be considered as a new
installation and function as per grid interconnection standards which require features such as
variable speed, full scale frequency converter, Low Voltage Ride Through (LVRT), reactive power
and voltage control.
Regarding recovering the cost of SVCs/STATCOMs and the procurement of reactive power, a state
level reactive power pricing mechanism will need to be developed. Since states like Tamil Nadu with
an abundance of VRE potential would be generating to support other states in meeting their
Renewable Purchase Obligations (RPOs), the costs of procurement of reactive power would have
to be accounted for through various mechanisms such as recovery through inter‐state assets and
the point of connection costs or ancillary services which are discussed below.
3.2 Integrated Generation And Transmission Planning
Integration of VRE requires system balancing reserves and network management resources. This
requires investment in flexible generation, transmission capacity and reactive power resources to
support the flow of power over long lines and to support the inductive power requirements of VRE
generators in an optimized manner. While transmission capacity is required to balance the
variations in active power output of wind turbines, reactive power resources are required more
locally to prevent excessive losses in the grid.
Generation capacity expansion planning in India is done by Central Electricity Authority (CEA) and
presented in the National Electricity Plan. The models are based on demand data as per the Electric
Power Survey. A load duration curve for all India is utilized to plan base load, intermediate and peak
load capacities. RE based capacities are treated as must run. The National Electricity Plan elaborates
the need for peak capacity and also highlights the characteristics of the same as: (i) Fast start up &
shut down times; (ii) Fast ramp up rate; (iii) Wide load range; (iv) Black start capability; (v) Un‐
restricted up/down times; (vi) Fuel flexibility; and (vii) Low emissions.
With increasing VRE penetration, the power system planning needs to adequately consider
extreme VRE conditions, including localised high VRE generation in low demand conditions, low
VRE generation in high demand conditions and rapid changes in net load. Transmission system
planning in India, as stated in the National Electricity Policy, is not based on an explicit consideration
of VRE capacities. Even as these issues have progressively come into the fore, (a separate Green
Corridor report has been prepared by Power Grid Corporation of India Limited), they need to be
integrated fully into CEA's perspective plans.
There is therefore a need for explicit consideration of RE capacity in the integrated transmission and
generation capacity expansion plan. Further, the models which explicitly model transmission
systems and conventional capacities required to balance variability in RE generation need to be
adopted by CEA.
3.3 Larger Geographical Control Area To Help Manage Variability
India's power system is concurrently managed by a large number of system operators. Active
management of demand as well as almost all VRE resources happen through the SLDCs. A sudden
reduction in VRE generation can be managed by the SLDC by ramping up existing thermal and hydro
resources (spinning reserves) if available or by procuring power in the short term markets. Similarly
a sudden increase in VRE generation would require the same thermal and hydro generators to back
However in a state like Tamil Nadu, where all thermal resources are designed to serve constant base
load only, the SLDC is left with limited options to balance load and supply, such as ramping tertiary
reserves such as the pumped hydro plant at Kadamparai in Tamil Nadu, overdrawl and the UI penalty
or load shedding.
Global experience has shown that a larger control areas presents better opportunities for balancing
the loss or gain of VRE resources. For example, whilst there may be a lack of flexible gas fired or
hydro generation or even energy storage within Tamil Nadu, these resources may be available in the
neighbouring state of Andhra Pradesh. However, several technical and commercial factors impede
the utilisation of such resources.
Our analysis indicates that the cost of balancing can be considerably reduced when carried out over
the entire Southern Regional grid rather than just over the Tamil Nadu network. The three case
scenarios considered in this regard are:
Case 1: 100% of the capacity required to provide positive balancing energy is procured through
capacities committed to provide balancing services. These facilities remain available on standby
until required by the system operator. Such services are normally procured through Ancillary
Services Markets.
Case 2: 50% of the capacity required to provide positive balancing energy is procured through the
Ancillary Services Market and 50% from the intra‐day/day ahead energy market
Case 3: 100% of the capacity required to provide positive balancing energy is procured through the
intra‐day/day ahead energy market
The results of the above analysis are indicated in Table 1.
Table 1: Penetration levels, balancing capacity and associated costs
Maximum Volatility of VRE generation (High wind season)
Tamil Nadu
Southern Region
Balancing cost
Balancing cost
The following observations can be drawn from the table above:
With an increase in VRE penetration, the balancing costs increase and the balancing capacity
requirement increases
With a larger control area, the balancing costs decline and the balancing capacity requirements also
Procurement of balancing services across state borders present differing policy implications. In
more mature markets with low levels of VRE, balancing services are generally only necessary for
unplanned events such as power plant outages. Generally the amount of reserve capacity
contracted is large compared to the small amount of actual electricity required. Balancing services
are usually either provided nationally, or in the case of Germany as the responsibility of the four
regional Transmission System Operators (TSOs).
Currently in India balancing services are not provided by the system operator. Grid connected
entities such as state distribution companies and generators are required to remain committed to
their schedules or pay UI charges for any deviation. At this time the UI mechanism provides a
commercial process for balancing.
Globally, the recent wide‐scale deployment of VRE has prompted additional demand for reserve
and fast response operations. This need has arisen predominantly due to inadequate levels of
accuracy in day‐ahead forecasts for VRE. It has also led to the need for redesign of the power
markets and led to the introduction of robust capacity and ancillary services markets. If VRE has to
be integrated on a large scale, such re‐design (along with incentives for the resources capable of
providing such services) is essential and needs to be accelerated.
3.4 System Operation Redesign
Keeping in view the increasing deployment of VRE in the country, a paradigm shift is needed
in the operations of the system operator (SO). There is a need to introduce greater co‐
operation between SOs for RE, and integration of SO operations for RE corresponding to
the definition of balancing areas. Our analysis indicates a very different set of emergent
priorities between the National Load Despatch Centre (NLDC) and the SLDCs, as is depicted
Table 2: Differing priorities of System Operators
Designated Balancing Power
Larger balancing areas
Centralised forecasting
Project level forecasting and scheduling of VRE
Transmission Augmentation
Transmission standards of performance
(particularly at STU level)
Demand Response
Operator awareness of situation (rapid updates)
Ancillary Services Markets
Integration in operator decisions
More flexible power markets
Standard and uniform Grid Codes/Connectivity
As is noteworthy from the table above that there is divergence of priorities between NLDC and the
SLDCs. While NLDC's focus combines market design and operations aspects, the SLDCs focus more
on the operations aspects. However, operator awareness was given the highest priority and
transmission augmentation is given the least priority by all categories.
In future, for large scale integration of VRE, the priorities must be reasonably aligned. This would
imply that the rules of engagement and also the incentives must have common threads. This will
require both commercial alignment as well as a common chain of control that focuses on VRE. This
could call for separate Renewable Energy Management & Control Centres (RMCs) to be instituted.
Such control centres would typically command a larger control area as compared to the present
mechanisms of state focused controls for VRE.
3.5 Overcoming Commercial Obstacles To Real‐time Power System Management
A. Addressing The Unpredictability Of VRE: Need For Forecasting And Planning
Many of the challenges related to integrating VRE can be addressed through better forecasting thus
providing improved visibility of output and a market design that addresses the unique
characteristics of VRE. Forecasts have two main purposes: scheduling to encourage efficient
competition in the wholesale market and security scheduling, ensuring that sufficient generation
capacity will be available in real time to meet demand.
Accurate forecasting will allow less conservative operating strategies to be adopted and the
economic benefits will easily outweigh any costs. The challenges at this time to better forecasting
are more commercial than technical, arising out of the way the VRE resources have been built and
managed in the legacy power system.
A framework for forecasting and planning in India should be based on the following principles:
Ability to develop accurate real‐time production forecasts for any generator strongly correlates to
the availability of site‐specific and precise real‐time data.
RLDC/SLDCs must obtain accurate forecasts of RE production to maintain reliable and efficient
system operation.
Commercially responsive forecasting must be carried out at sub‐station level by scheduling
coordinated or aggregated RE.
4. Centralised forecasting must be done by the system operator also.
Forecasting charges availed by the RLDC/SLDC,
would be payable by all the VRE generators.
It may be necessary to combine centralized (by the
SO) and decentralised (by wind farm operators or
their agents) forecasts. Decentralised forecasts
will need to be paid for individually by the
generators and recovered from green power
benefits. For centralised forecasts the cost will
need to be recovered through the RLDC/SLDC
charge but levied only on the VRE resources.
Figure 8: Improvement in wing forecasting
in the Spanish electricity markets
International experience demonstrates that over time it is indeed possible to reduce the forecasting
errors within very acceptable levels. A third party arrangement has emerged in the Spanish market
where specialised forecasting and aggregating services have evolved to bring about better
predictability. Over time, this has brought down the forecasting errors as shown in Figure 8. This
has also been demonstrated in the Indian market by entities working in the area of wind forecasting.
Alternatively, since decentralised and centralised forecasts play a pivotal role in grid integration of
VRE and benefit society as a whole, mechanisms for centrally procuring forecasts could be defined.
The cost in such case can be recovered as SLDC/RLDC charges.
B. Improving Visibility Of Resources: Data Collection And Procurement
Enhanced forecasting can be achieved only through better system visibility. The need for
centralized procurement of ancillary services for supporting VRE generation has already been
emphasised earlier in this report. RLDCs are best placed to coordinate such ancillary services in
coordination with the SLDCs. Therefore, there is a need for framing guidelines for improving
visibility, data collection and procurement. These guidelines should cover following aspects:
Physical site data
Meteorological and Production Data
Communication, Metering and IT infrastructure requirements
4. Frequency of data transmission
Data Security
Information disclosure requirements by VRE resources need to be included in the Grid Codes and
commercial contracts to allow for better information availability and consequently better
awareness on part of the SO.
C. Scheduling Mechanism – Day Ahead And Intra Day
A close to real‐time mechanism for scheduling already exists as the IEGC permits 8 schedule
revisions per day at 3 hrs notice and this offers an opportunity for wind generators to correct
themselves, as is shown in Figure 9.
Figure 9: Scheduling Mechanism
However, from the system operation perspective, the system operator needs to plan for capacity to
support the variability of VRE resources. Close to real‐time management required for such
situations requires a well functioning ancillary services mechanism/market or a demand response
program. For the ancillary services market to provide the functionality required, it is essential that
VRE resources schedule their output accurately. Hence, VRE generators must be responsible for
their schedules albeit with some relaxation due to the intermittent nature of their resources.
D. Energy Accounting Mechanisms For Imbalance
There are two types of costs that would need to be shared. These are the fixed costs associated to
capital expenditure and variable costs associated to balancing and system losses.
Fixed costs should be approved by Central Electricity Regulatory Commission (CERC) and recovered
through the Point of Connection (PoC) mechanism. Similarly costs associated to losses could be as
per the PoC mechanism. Once the market for ancillary services is established, the cost of cycling
would be reflected within the bid price of resources providing these services.
At this time, CERC has attempted to manage the cost of variability through the Renewable
Regulatory Fund (RRF). This mechanism has been modified to address various issues raised by the
grid constituents. However, a universally acceptable solution on sharing of the integration costs is
still elusive. As the penetration of VRE increases, (sometimes in unpredictable ways and places) the
new challenges continue to emerge.
International experience indicates that with the increased level of penetration of VRE, it has
become imperative to treat them at par with other resources in terms of systems operations and
market operations costs and processes, but with some important exceptions.
Firstly, to the extent possible, greater scheduling flexibility is permitted to VRE (this is also the case
in India). Secondly, they are provided with an incentive (or uplift) to manage the costs of deviations
from schedules. Subject to these specific exceptions, the VRE resources operate under the same
set of market rules as conventional power. This allows for smooth operations of the market and the
power system and encourages innovation and commercial discipline. With increase in VRE
penetration, it will be important for India to consider such explicit commercial rules instead of
overly socializing the costs, as is being currently envisaged.
E. Provision Of Flexibility In The System ‐ Demand Response And Energy Storage
As stated above, some RE sources being variable in nature, there is a need for the system to have
adequate level of flexibility to support the need for balancing power. Flexibility in the system can be
achieved on the demand side through Demand Response and on the supply side through Energy
Storage (can also act from the load side depending on the application).
Table 3: Applications to provide Flexibility in the System
Demand Response5
The Utilities in India usually resort to load shedding and UI drawals to manage real time
imbalances of power. Alternatively, some states also purchase costly power in the
short term markets to manage these imbalances. Such imbalance mitigation measures
can be effectively managed through a robust DR program. In states like Tamil Nadu,
Rajasthan, Gujarat etc, which are witnessing fast paced utilization of their Renewable
Energy Potential (especially wind and solar), DR Programs can be effectively utilized to
manage the variability in generation from such renewable sources of generation.
Therefore, DR programs can be utilized by the distribution utilities to manage the
power systems in short term and also obviate the need for purchase of costly short
term power.
Energy Storage
Energy storage owing to its multiple uses and configuration can support VRE
integration in variety of ways. These include, load following and load leveling,
balancing uncertainty through provision of reserves, smoothening generation output
from plants, matching generation to loads through time shifting etc.
Table 5 summarizes the key recommendations made in this report.
DR is a consumer's ability to alter electricity consumption at their location when prices are high or the reliability
of the grid is threatened. DR has the ability to provide support in short term power management that involves
balancing real and reactive power generation and demand in real time.
Table 5: Summary of proposed interventions to support efficient VRE Integration
4. Implementation Road Map
The solutions stated above present a large and complex agenda. Large scale RE integration is also
unlikely unless the issues are addressed comprehensively. Basis the discussion presented in this
report, the proposed road map is presented in Table 6.
Better integration and management of VRE will be contentious. As penetration increases, the
magnitude of issues will increase. The solutions must proceed hand in hand to ensure that
generation and transmission infrastructure creation is well co‐ordinated. Most components of the
nine high power transmission corridors being developed in the ISTS are expected to commence
commercial operation by 2018. These physical developments at the inter‐state level need to be
backed up by policy and regulatory action based on robust commercial mechanisms.
Table 6: Proposed Implementation Road Map
About the study
The study has been supported by Shakti Sustainable Energy Foundation and carried out by Mercados
Energy Markets India Pvt. Ltd (
About Shakti Sustainable Energy Foundation
Shakti Sustainable Energy Foundation works to secure the
future of clean energy in India by supporting the design and
implementation of policies that promote both the efficient
use of existing resources as well as the development of new
and cleaner alternatives. Shakti's efforts are concentrated
in four specific areas: power, energy efficiency, transport,
and climate policy. The organization acts as a systems
integrator, bringing together stakeholders in strategic ways to enable clean energy policies in these
fields. It also belongs to an association of technical and policy experts called the ClimateWorks Network.
Being a member of this group further helps Shakti connect the policy space in India to the rich
knowledge pool that resides within this network.
Shakti Sustainable Energy Foundation
| The Capital Court | 104 B/2 Fourth Floor, Munirka Phase III | New Delhi 110067 | India
T +91 11 4747 4000 | F +91 11 4747 4043 |