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Mitigating risk in wind power production and sale. Modeling the impact of intermittency and forecast errors.

Mitigating risk in wind power production and sale.

Modeling the impact of intermittency and forecast errors.

January 2010
January 2010

Experience you can trust.

Understanding mitigating potential risks to power purchase agreements.

The variable nature of wind power has a direct impact on the fi nancial benefi ts of Power Purchase Agree- ments (PPAs). KEMA helps clients mitigate the fi nan- cial risks inherent in wind farm PPAs through modeling both the intermittency and forecast errors and the planned and unplanned grid events leading to curtail- ments.

Understanding mitigating potential risks to power purchase agreements. The variable nature of wind power has a

Identifying and understanding the risks

Typically developers will enter a PPA that falls into one of two main categories. In both cases the developer is at risk from unforeseen events that are diffi cult to quantify.

All at a fi xed or market-based price over specifi ed period – The Purchaser agrees to purchase all of the wind power a developer can produce at either a fi xed or market-based price over some agreed upon period. If the wind farm fails to produce this power there is no penalty imposed. However if the grid can not handle the extra production due to a drop in demand or sud- den increase in production then the extra power must be curtailed which will have a signifi cant economic impact on the producer, the consumer and reliability of operations.

Fixed quantity based on “fi rm” agreement – The Purchaser agrees to purchase some fi xed quantity of the wind power a developer can produce based upon a “fi rm” agreement where penalties will be imposed if the developer fails to produce the agreed upon power. In this case the wind farm must rely on accurate forecasting or maintain their own backup power in the case of an unforeseen drop off in wind otherwise signifi cant penalties may ensue. They may also wish to aggregate wind power across a geographical area and agree to sell only a small portion of their capacity to ensure overall reliability. Curtailment may also be a possibility if sudden spikes in wind power that impact grid reliability occur.

To understand and mitigate the potential risks to a PPA, a developer and/or Regional Transmission Op- erator may want to know any number of the following:

What is the likelihood that the wind farm in ques- tion will be curtailed due to a sudden and large drop in demand or increase in production? What is the long term economic impact of the accumu- lation of such events?

What is the long term economic impact of the ac- cumulation of forecasting errors? What forecast- ing methods are best suited to my wind farm?

What is the maximum capacity I should agree to when signing a Power Purchase Agreement? What are the risks and benefi ts of various incre- ments of kW capacity for fi rm Power Purchase Agreements?

Can our current transmission capabilities handle intermittent surges in wind power or will there be failures in the grid? Is battery storage or other technology necessary?

Figure 1: Park Power Curve indicating kW by wind speed and direction of a grid layout
Figure 1: Park Power Curve indicating kW by wind speed and direction
of a grid layout wind farm. Power is not evenly distributed across all
directions due to wake interactions between turbines.
25000
20000
15000
10000
5000
0
NNW NW
WNW
25
W
20
WSW SW
SSW S
15
10
SSE SE ESE
E
ENE NE
5
NNE N
0

Modeling wind farm output and grid op- erations reliability

KEMA relies upon a variety of modeling tools to estimate the net cost of unforeseen intermittency and forecasting errors. Our process begins with standard wind resource assessment and the determination of a Park Power Curve (PPC), which is either provided by the developer or estimated using advanced wind modeling software that utilizes local wind data, eleva- tion and topographical maps as well as turbine power curve specifi cations. A Park Power Curve is a three dimensional version of a standard power curve except that it accounts for the direction the wind is blowing in and any subsequent wake interactions that would result. A park power curve can then be used with wind data to model the output of a wind farm during its windiest days to get a time series of kW output at a

high resolution (i.e. 1 second) or aggregated by hour. High resolution wind data can used with KEMA’s pro- prietary KERMIT model which models the reliability of grid operations in terms of frequency and interchange fl uctuations. KERMIT utilizes a detailed simulation of both conventional and renewable generators as well as storage facilities with a realistic representation of the grid. This allows the user to model the likelihood of curtailment due to frequency deviation of the grid.

Developers and Consumers are exploring the costs of integrating wind on their system to avoid curtail- ments and operate the system reliably. For example, increased wind import purchases creates a potential for net interchange deviations.

Modeling curtailment

With our proprietary KERMIT model, KEMA has the capability to model both planned and unplanned sys- tem events that give rise to curtailments.

In addition, KERMIT can model forecasting errors as a deviation from scheduled production by incorpo- rating realistic “hind-casts” of state-of-the-art fore- casting methods (i.e. numerical weather prediction, neural networks or other). The discrepancy between the hind-cast and actual power is then refl ected in the stability of the grid which determines the neces- sary backup power or geographical dispersion of wind farm. Further time series analysis can also be done to determine the coincidence of power produc- tion across various wind farms to determine the right capacity to agree upon in the PPA.

Battery storage can also be considered to help stabi- lize or smooth out large fl uctuations in grid stability. All of these factors are then included in a detailed cost- benefi t analysis to account for various scenarios that might occur to help guide developers and/or utilities to structure their PPA. In addition to system frequency and regulation quality, KERMIT also models market prices and volumes as well as information on plant emissions.

Modeling Curtailment Actual Interchange Planned Interchange 130 120 Deviation in Planned versus Actual Interchange creates Curtailment
Modeling Curtailment
Actual Interchange
Planned Interchange
130
120
Deviation in Planned versus Actual
Interchange creates Curtailment Problem:
-
Transmission Outage or De-Rate
110
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Load Drop
-
Must Run Generation Turned On
100
90
80
70
60
50
40
Time
MW of Interchange (Generation + Net Imports - Load)
About KEMA KEMA specializes in business and technical consult- ing, operational support, measurement and inspection, testing

About KEMA

KEMA specializes in business and technical consult- ing, operational support, measurement and inspection, testing and certifi cation. With over 85 years of expe- rience in serving energy and utility clients, KEMA has developed a reputation for integrating deep technical and functional capabilities with management expertise to provide solutions that deliver profi table, reliable, sustainable results. More than 500 energy and utility clients in over 70 countries rely on KEMA’s impartial, objective and expert consulting services to plan, build and maintain their trategies for growth.

For additional information, please contact:

KEMA, Inc. 67 South Bedford Street, Suite 201E Burlington, MA 01803

Tel: +1 781 273 5700 info.consulting@kema.com www.kema.com/WindModeling

www.kema.com

www.kema.com