The Bottom Line: Market mechanisms and careful planning fill in the gaps when non-dispatchable and intermittent resources can’t meet demand – while still unleashing the benefits of competitive wholesale electricity markets.
An aerial image of the Manhattan skyline at night in New York. Competitive markets are designed to help the city lights stay on during the energy transition. Getty Images/adamkraz
As wind and solar resources provide a greater percentage of electric generation powering the grid, competitive markets—and flexible, dispatchable generation resources like natural gas—are essential to ensure reliability. The amount of power generated by a solar panel or wind turbine will vary depending on the time of year, the location of the installation, and the weather. At the same time, consumer demand for energy does not necessarily follow the same peaks and valleys. In fact, those patterns are often the opposite.
Balancing consumer demand for energy with varying inputs from different generation sources is a complicated task. U.S. competitive electricity markets are an effective way to ensure reliability while mitigating costs, especially as an increasing amount of generation on the grid comes from non-dispatchable sources.
Daily and Seasonal Variability
Wind turbines and solar panels are often described as “intermittent” generation sources since these technologies only work if the sun is shining or the wind is blowing. While this characterization is true, the situation is more complicated than that. Both wind and solar generation output also vary over the course of the year and depending on where the power is being generated.
Solar power provides a good example of this. The sun constantly emits solar radiation, but how much of this energy reaches a given area—such as a solar facility—during a particular period of time can vary. In general, solar radiation is most intense when the sun is at its highest apparent position in the sky—at solar noon—on clear, cloudless days.
Regions in lower latitudes and with arid climates generally receive higher amounts of insolation, or solar radiation, than other areas. Also, seasonal (monthly) variations in solar resources increase with increasing distance from the earth’s equator.
This means that even in areas with little cloud cover, grid operators must plan for reduced solar generation during winter months when the days are shorter. Moreover, they must also plan for shifts over the course of the day.
A study of wind and solar generation in Texas, for example, found that output largely followed these trends. The first graph shows hourly wind and solar output on June 21 (the summer solstice) and the second graph output on December 21 (the winter solstice.)
Wind is another non-dispatchable resource. The Energy Information Administration (EIA) has performed similar studies on the seasonal patterns of wind, finding that wind patterns are also highly seasonal and, as a result, wind plant generation varies over the course of the year. In most of the country, the capacity factor for wind generation is highest in the winter, but in California, the effect of a strong cold Pacific current reverses this effect.
In addition to these broader seasonal trends, tracking hourly output shows that wind generation often increases in the afternoon and evening, while solar power declines as the sun begins to set. California, which has also installed a large amount of wind and solar, has noticed similar patterns.
While wind generation increases in the evening, so does consumer demand for energy. Over time, net peak usage has also gradually shifted to later in the day. California now finds that demand is peaking around 7:30 in the evening, long after solar power has gone offline for the day.
Markets Help Ensure Reliability
And while wind generation often picks up in the evening, these peaks are likely to come too late to meet peak consumer demand. In West Texas, for example, wind output peaks just before midnight after many people have gone to bed and their household’s power usage has dropped.
All of this makes the task of balancing energy supply and demand complicated.
Often, this requires careful planning on the part of systems operators, who are responsible for forecasting anticipated demand for a given day and time and coordinating with available power generation resources to ensure that the demand can be met.
Within this market structure, higher prices help to boost investment in lower-cost generation assets and encourage their deployment where electricity is most needed. The PJM Interconnection, for example, hosts competitive auctions to secure capacity resources for the next three years. These auctions provide price signals to show which resources should enter and exit the system. In addition, the auctions help to provide financial stability and allow consumers and generators to plan for the future.
But when the weather suddenly changes — say during an unexpected heat wave or cold snap or during a drought — additional power resources are often needed. Real-time or spot markets are used to address brief fluctuations in power demand and supply to maintain grid balance but longer duration outages are also a growing concern.
This is an area where dispatchable and non-dispatchable resources can support each other.
To make sure that households and businesses have the power they need requires a diverse mix of energy technologies and resources. In some instances, battery storage can provide a short buffer as solar power goes offline and other generations sources pick up. More commonly, quick-firing natural gas plants pick up the slack. Natural gas generators provide a key partnership for renewables, ensuring that consumer power needs are met during the times of day when energy demand is high and solar generation has gone offline.
As the North American Electric Reliability Corp. (NERC) wrote in its annual risk assessment late last year, “Natural gas is the reliability ‘fuel that keeps the lights on,’ and natural gas policy must reflect this reality.”
This dance of blending wind, solar, and natural gas generation to lower emissions without sacrificing reliability shows how markets and innovation are making America’s power sector greener than ever while keeping costs low for energy consumers.
It also underscores the continuing value provided by natural gas – along with other resources – and competitive power producers as the U.S. moves to a more electrified economy.