How Could China and Canada Handle Their Wind Curtailment Issues——Take California as an Example

Sheng Liyuan

(Research Center of Legal Culture,Hunan Normal University,Changsha 410006,China)

Abstract: The sustained growth in the scale of global wind power following the 2015 Paris Climate Agreement has and will continue to change the energy supply mix in many jurisdictions.A few decades ago,the supply mixes in most jurisdictions were dominated by hydro,coal and natural gas.Variable renewable sources of energy,once a small part of the energy mix,are now becoming critical.However,the higher penetration of variable renewable energy also presents several challenges,such as wind curtailment.Curtailment serves as a means to maintain system balance and reliability;simultaneously,excessive curtailment negatively affects the decarbonization targets and investor confidence in renewable power.By comparing the legal policies of China,Canada (Alberta Province) and USA (California) in dealing with wind curtailment,this paper puts forward some suggestions for the improvement of the legal system of China and Alberta.

Key words：Wind curtailment;ISO’s market;CAISO

1 Introduction

The sustained growth in the scale of global wind power following the 2015 Paris Climate Agreement has and will continue to change the energy supply mix in many jurisdictions.A few decades ago,the supply mixes in most jurisdictions were dominated by hydro,coal and natural gas[1].Variable renewable sources of energy,once a small part of the energy mix,are now becoming critical.The addition of renewable energy sources has diversified the supply mixes in different states.The increasing proportion of renewable energy has brought multiple benefits to the economy and environment.However,the higher penetration of variable renewable energy also presents several challenges[2],such as wind curtailment.Curtailment serves as a means to maintain system balance and reliability[2];simultaneously,excessive curtailment negatively affects the decarbonization targets and investor confidence in renewable power.

As the world’s two most productive areas of power resources,North America and China have both installed a significant proportion of wind power capacity.However,In terms of the wind curtailment rate,there is a huge difference.Take these three regions as examples:Gansu,a wind powerhouse of China,had a wind curtailment rate of 27% in 2017[3].China’s curtailment rate has declined in recent years,to around to 5-7%，but some provinces are still above 15%[4].Canada is also an emerging energy power.For jurisdictional reasons,this paper takes Alberta as an example,which has the 3rd highest capacity in Canada[5].Wind provided 7% of Alberta’s net on-grid generation in 2017 and 2018[6],yet the wind curtailment rate in Alberta is low.A model for addressing wind curtailment is California,USA,where curtailment rate has reached an almost negligible level[7].California’s experience in addressing wind curtailment has much to offer to other power markets around the world.This paper will present a case study of California’s approach followed by recommendations to both Canada(Alberta) and China.

This paper focuses on Canada (Alberta) and China as their electricity markets have comparable conventional power mixes,and thermal power generation accounts for a large proportion in both countries.And both countries are endowed with abundant wind resources and significantly installed wind power capacity.

This paper first presents a definition of wind curtailment;then examines wind curtailment in the Chinese and Alberta power markets.Next,it explores how the Californian power system mitigates the renewable energy curtailment in the face of massive growth of wind and other sources of renewable power sources.The final of the paper proposes three suggestions such as introducing the renewable portfolio standard for both Canada (Alberta) and China’s existing power markets to reduce wind curtailment.

2 Definition of Wind Curtailment

Curtailment has been defined in various ways due to differences in the practice and market mechanisms.Simply put,to manage the grid congestion and maintain system reliability,system operators or utilities have to periodically curtail these renewable energy generators[8].This paper defines curtailment as ‘a reduction in the output of a generator from what a system of well-functioning wind turbines are capable of producing,typically on an involuntary basis[9].Thus,wind curtailment will occur when system operators or utilities require wind plants to decline their output to minimize transmission congestion or otherwise assist the system in achieving the optimal mix of resources[9].

The causes for wind curtailment differ.The major causes for wind curtailment in California,Canada (Alberta) and China will be discussed in detail in the next section.

3 An introduction to the curtailment of China and Alberta electricity market

3.1 The wind power development and curtailment in China

The COVID-19 pandemic doesn’t seem to have affected China’s renewable power industry at all.The newly installed wind power capacity has soared to 71.67 million kilowatts,an increase of 178% over 2019[10],making it China’s third-largest power source[10].

With the long-term,large-scale development of wind power,China has saw an extremely high level of wind curtailment.Between 2010 and 2017,the national average wind curtailment rate reached 16 %.[11]Prior to 2018,wind curtailment rates in Gansu and Hebei Provinces exceeded 50%[12].Wind plants have bid to enter the electricity market at zero CNY at most time of the year,otherwise either receive very low quotas to sell the power or be restricted,which could completely halt their power generation[13].The National Development and Reform Commission of China enacted two regulations to prioritize renewable power to address this dilemma.They guarantee the purchase of a minimum number of annual hours from each wind plant,with fixed electricity price.Only the portion that exceeds the guaranteed annual hours can be curtailed through market transactions[14].As a result,China’s curtailment rate has dropped to 5 to 7% in recent years[15].

In many regions of China,wind power has been curtailed because of transmission congestion.Compared with thermal power,the wind is more variable,which restricted its tapping,dispatching and operating.Besides,due to the lack of a real-time market,China can only reserve some places in annual and monthly plans for renewable energies[16],which was far from enough to cope with the variability in wind power,resulting in high levels of curtailment.

3.2 The wind power development and curtailment in Alberta:

In Alberta,the installed wind power capacity was 1,685 MW by 2019[17],ranking the third in Canada.One of Alberta’s energy goals is to generate at least 30% of its electricity from renewable sources by 2030[18],which provides significant policy and economic support for the large-scale development of wind power.

Unlike Chinese power market operators,the Alberta Electric System Operator (AESO) has adopted the uniform-priced procurement auction and created a single real-time wholesale electricity market.[19]Suppliers are required to quote (bid) for their total available generation capacity for each hour of the day[20],and wind generators are allowed to participate in the wholesale market.Under such a market mechanism,the wind curtailment in Alberta is scant.

The major causes for wind curtailment in Alberta are oversupply,transmission constraints and sharp increases in wind power[21].AESO curtails wind when it failed to manage substantial rise in wind output.[21]

In 2018,AESO conducted three competitive auctions for Renewable Energy Projects.Successful bidders were awarded“contracts for differences”.With those contracts,the government commits to paying a certain price to suppliers.Unfortunately,the newly elected provincial government will no longer implement those practices.AESO may require power plants to curtail due to grid reliability concerns,but this rarely occurs in Alberta.

To achieve the decarbonization goal of generating 30% of electricity from renewable energy sources by 2030,a large amount of renewable energy power plants will emerge.Curtailment will surely occur in the process of integrating various sources of electric energy.

In summary,both Alberta and China have ambitious climate policies and abundant wind resources.They have comparable conventional power mixes,in which thermal power generation accounts for a large proportion.Some of California’s experience may well be applicable to both jurisdictions,which is why they are examined in detail in this paper.

4 A case study: how does California deal with the curtailment challenge

Not only is California a single energy market like Alberta and China,but its power resources and market mechanism (prior to the dramatic introduction of renewable energy) are similar to the other two jurisdictions,hence,the experience of California is likely to benefit Alberta and China.

4.1 Wind curtailment in California

California has set a decarbonization goal of deriving at least 50% of its electricity from renewable energy sources by 2030[22].The emergence of variable renewable power in a short period of time leads to oversupply,which most effective solution is curtailment[23],meaning that suppliers must reduce the output of a renewable resource to a level below what it could have otherwise produced[23].In California,curtailment could be found at 3 levels.Firstly,when over-supply occurs,the bulk energy market will first select the lowest-cost power resource.At this point,the wind plants would bid into the market at low levels of production due to low profit potential[23].The ISO’s market optimization software will then automatically adjust supply to demand.These curtailments are normal and are the healthy outcomes of market readjustment.Lastly,the ISO will intervene manually if market-based solutions fail to clear the excessive supply of electricity.In this case,ISO grid operators require specific renewable plants to reduce output to assist with maintaining overall grid stability.

In 2018,less than 0.7% of total solar and wind energy in California was curtailed[24].The management of renewable energy curtailment in California is very effective,which is inseparable from its power market mechanisms and their new efforts in reducing wind curtailment.Due to space limitations,two aspects are selcted for discussion in this thesis,which provide insightful implications to Alberta and China.Owing to different power market mechanisms in Alberta and China,the applicable methods will be varied,which will be discussed later.

4.2 Portfolio standard of renewable sources

In 2002 California introduced Renewable Portfolio Standard(RPS),which obliges all electricity retailers in the state to purchase a certain percentage of their electricity from renewable sources[25].For each unit of electricity that produced by renewable plants,the generators receive a Renewable Energy Certificate (REC) issued by the government[25].In California,one megawatt-hour·h of renewable energy power is equivalent to one REC;the renewable energy generators can transfer RECs whilst selling electricity[25].Power supplier with quota obligations will collect these RECs but cannot exceed a certain percentage of the total quota obligations (depending on the natures of enterprise)[25].Therefore,in the RPS system,the price of renewable energy electricity consists of two parts: one is the market price of electricity;the other is the price at which green certificates are sold.

Since 2011,all electricity retailers have became participants of RPF in California,and the quota calculation is based on the amount purchased and sold by each retailer in 2001[26].Since 2006,under the AB32 law,CAISO has added 1% of the amount of renewable energy sold in the previous year to the retailer’s annual quota[27].

A diverse portfolio of renewable sources is thought to be an essential strategy to prevent over-generation and curtailment.Firstly,RPS stipulates that retail power enterprises must purchase a certain proportion of renewable energy,which guarantees the quantitative production of wind and other renewable energy.Because if a large amount of renewable energy is curtailed,retailers will not be able to purchase enough renewable electricity to meet the requirements,so they will tend to pay higher prices.Otherwise,they will face high fines.Under the circumstance,the market will raise the tariff of renewable energy power,which provides an incentive for wind plants to generate electricity.Furthermore,California’s RFP is a combination of quotas that contains various renewable energy sources.This combination itself will be able to coordinate between sources to achieve a minimum over-supply[28].

4.3 Develop the Ancillary Services Market

Ancillary services refer to the operations that maintain grid stability and security (excluding power generation and transmission).Ancillary services usually consist of active power control,frequency control,reactive power control,and voltage control on different timescales[29].Using ancillary services market to reduce wind curtailment involves two aspects.The first is the of use ancillary services products to reduce curtailment directly,and the second,is the very innovative tapping of wind farms as ancillary service providers to make better use of wind power and reduce curtailment.

The timing and amount of wind can be predicted but not fully controlled,which makes the net load of the system (raw load minus wind capacity minus solar capacity) to vary considerably in a day[30].During peak wind generation periods,the power demand may be small,which will result in over-supply.To address this issue,CAISO introduced a new ancillary service product called “Flexible Ramping Product”（FRP）in 2016 and implemented two flexible market products in fifteen min and five min markets,which are Flexible Ramp Up and Flexible Ramp Down[31].During the transactions,FRP does not need to be quoted;the purchaser will pay an opportunity cost for FRP,the main energy and other auxiliary services are simultaneously cleared.This collaborative optimization optimizes the FRP demand curve and the demand for other ancillary service products,determines the market price and quantity of each product,and reduces the possibility of curtailment of renewable energy[32].

Another approach to reduce wind curtailment is to encourage wind power plants to provide ancillary services to the electricity market.This is the latest initiative in California.Traditionally,it was considered unfeasible for wind plants to provide ancillary services because of the instability of wind power.But CAISO had conducted a study and found that wind turbines with variable speed generators may add synthetic inertia to the grid,thus helping the system to control the frequency[33].Therefore,CASIO started to encourage some wind generators to provide ancillary services to the market.

5 What can Alberta and China learn from California

By drawing on California’s experience on wind curtailment,the rolling-out of the RPS,the tapping of the auxiliary markets and energy storage,Alberta and the Chinese power market can resolve this issue more effectively.

5.1 Introduce the RPS

One of California’s most effective mechanisms to deal with wind curtailment is RPS.This diverse portfolio of renewable has proven to be effective in preventing over-generation and curtailment.Therefore,to reduce wind curtailment,RPS should also be introduced in Alberta and China.However,due to varied electricity regulations and markets,the implementation of RPS should also be varied.

China has introduced the Feed-in-Tariff (FIT)[34],however,the effect on curtailment is far from satisfactory.In contrast,only a small portion of renewable FIT in Alberta comes from auctions under the Renewable Electricity Program.Two jurisdictions placed different emphases on the legal framework when introducing the RPS.

Alberta’s legal framework of the electricity market will face two changes: the rules of the wholesale and the retail power market may treat consumers differently[35].The wholesale electricity market in Alberta resembles a stock exchange;one of its fundamental principles it is to match the supply and demand at all times[35].Market participants can buy and sell at whatever price they want.However,with the RPS,this rule will be adjusted;the retailers will have to purchase a certain percentage of renewable energy,which will break down the priceoriented pool trading system.The market cannot adapt to this change by itself,hence,a new framework is needed to ensure the smooth implementation of RPS.

From the retail power market,Albertan consumers choose the energy provider by themselves,from regulated-rate companies who offer regulated rates for natural gas and electricity[36]or non-regulated companies that have been licensed to sell and generate electricity throughout the province[36].The introduction of RPS may be more straightforward for the former,but it means breaking the absence of price regulation for the latter.And for the latter,there are many unregulated retail customers[37],even if all retail companies accept and abide by the rules of the RPS,those customers can still seek their current retail prices through extending their contracts[37].Therefore,AUC needs to redesign the regulatory framework of retail in the context of RPS to decide whether to treat regulated and unregulated purchasers differently.

China’s law should focus on the regulation of provincial power regulatory authorities.In China,the power grid is state-owned[38],the rates of generation,transmission and retail are regulated by the Provincial Development and Reform Commission (PDRC)[38].PDRCs are entitled with administrative power and obtain enormous revenue from the electricity market[39].They set regulations for the retailers[39],including RPS,according to the law and the central government,but they may not implement RPS well as it affect affects vested interests.Retailers cannot purchase any renewable power without the approval of PDRC and provincial governments and a quota[40].Even PDRCs fail to perform their duties,there is almost no one to bring them to a court or get compensation.People or companies can only appeal to the office of the supervisor agency (NDRC) or conduct administrative litigation to sue the Ministry of Industry of China[41].The litigation costs are expensive,while the likelihood of acceptance and hearing is slight[42].Therefore,these two remedies are invalid in essence.Therefore,besides the RPS regulations,administrative regulations are needed to restrict the PDRCs’ implementation of RPS,which means to include the achievement of RPS indicators in the PDRCs’ performance evaluation system,and if PDRCs failed to meet the requirement in the RPS issues,they will not be able to achieve their administrative credit objectives.

5.2 Improve the Ancillary Services Market

In California,CAISO introduced an Ancillary Service called the “Flexible Ramping Product” to solve the over-supply issue caused by dramatic variables in the net load system.It has been proven to reduce wind curtailment substantially.Remove the technical complexities and the principle of FRP is simple: to assist the peak load regulation of the system to ensure the stable generation of renewable energy in demand valleys.Similar ancillary services should be developed in China and Alberta to achieve the same goal.

For China,auxiliary services will require additional supporting subsidies to transform and upgrade thermal power units.The operators have to reduce thermal power generation or even shut down if the curtailment of renewable energy is to be avoided in the power demand valley[43].In China,coal power remains a fundamental resource for maintaining the stability of the grid.It takes a long time for thermal power plants to restart after shutdown,and with extremely high costs,and the restart may cause a blackout and substantial increases in electricity prices[43].Therefore,it is unlikely for China to allow largescale shutdowns of thermal power to assist peak-load regulation[43].The only solution is to require some thermal plants to keep operating at minimum safe load.Therefore,the peak-load regulation capacity is determined by two factors: 1.The minimum safe load rate of thermal power units involved in the peak-load regulation;2.auxiliary services.

The average minimum safe load rate of thermal power units in China is around 40%[44].During periods of low power supply,they still operate at half of their maximum power,so there is not enough room for renewable energy since demand is invariable.Therefore,in addition to the cost of providing ancillary services,Chinese power operators should also offer upgrading subsidies for thermal power units.The cost of upgrading the minimum safe load rate in this manner is high,and may not be covered by revenues from the provision of ancillary services and regular payment to the plants.Thus,without proper subsidies or other preferential policies,thermal power plants will find it difficult to complete the upgrading,and renewable energy curtailments will be stuck at current levels.

Alberta is another story.Its power market is a real-time energy market with an automatic generation control design[45],and its peakload regulating function is currently sufficient.Peak-load regulation is temporarily absent from AESO’s ancillary services[46].The introduction of FRP-like ancillary services is crucial to reduce curtailment and increase the market share of renewable energy.However,the potential of wind plants in Alberta’s ancillary service market is greater than this: wind could be used as an ancillary service for frequency control by installing automatic generation control (AGC) technology on wind turbines[47].AUC should encourage wind plants to join the auxiliary service market by installing AGC or other supporting technologies.The AUC will have to decide if these generators will receive RPS credit if they sell their power to the ancillary services market,rather than to the consumer market.Clarifying these issues is critical to enable wind plants’ participation in Alberta’s ancillary services market.

In short,both measures can be effective in reducing the potential for wind curtailment in Alberta,whether by designing and introducing ramping products that integrate renewable energy or by encouraging wind power plants to install AGC through policies or subsidies.

6 Conclusion:

The renewable energy industry has been booming,with North America and China being the world’s leaders.As power markets begin to integrate the many emerging renewable energy sources,wind curtailment has become an issue that cannot be neglected.Not only does it affect investors confidence and the growth of the renewable energy industry,it may also hinder the goal of curbing climate change.Therefore,it’s significant to reduce wind curtailment to a proper level.

California is the world leader in the industry of renewable energy.It has improved the market mechanism and introduced the Renewable Portfolio Standard and auxiliary service products to address the curtailment of renewable energy.California’s energy storage has also contributed to reducing this curtailment.Of course,there are various measures for wind curtailment in California,but these three are readily applicable to both Alberta and China.So this paper conducted a case study of California’s experience,examining the legal framework that supported the RPS and FRP,and why it has been successful in reducing wind curtailment.

The power market environments and legal frameworks of Alberta and China are varied: the Alberta power market is a relatively mature real-time market,which attaches great importance to environmental protection and public participation and has a well-established legal mechanism;while China’s power market is a medium and long-term contract market with a large number of state-owned enterprises.There are various administrative interventions and lack of consideration for both environmental and public participation.For administrative reasons,many renewable energy legislation cannot be wellimplemented.Alberta and China should set different priorities if they are to draw on California’s experience.

Starting with the current status of renewable energy legislation,electricity markets and causes of curtailment in Alberta and China,this thesis presents preliminary suggestions on perfecting the legal framework (regulatory framework) to mitigate the current level of wind curtailment.Hopefully,It will trigger thoughts about integrating renewable energy into the two jurisdictions from the perspective of legal framework and policies.