Barriers to Entry or Minimum Acceptable Participation Requirements?

Well intended compromises for renewable energy led to bad operational outcomes

We Were Trying to Help

With the benefit of hindsight, one of mistakes we made in the power industry with renewable energy was to allow wind and solar generators to connect to the bulk power system with reduced technical requirements relative to conventional synchronous generators. Renewables were allowed to connect without the basic minimum technical requirements we had expected from generators for over a century: to be dispatchable by system controllers, to provide real power, to provide reactive power, and to provide frequency support. This was the industry’s well-intended attempt to remove “barriers to entry” for renewables to enable and accelerate their development.

We knew inverter-based generators didn’t provide reactive power or inertia and were not dispatchable like conventional synchronous steam, gas-fired, and hydroelectric generators, but we (myself included) assumed that this would only be a deficiency for the first generation of renewables and that these operationally critical technical attributes would be developed over time if renewables were to become a material part of the power system. We thought that this compromise to get the ball rolling would provide the time and technical impetus to develop robust new power sources that would provide the full suite of AC power system requirements in the long term and diversify our available generating resources.

But We Ended up Creating Big Problems

But we were wrong. Soon after the introduction of renewables to the bulk power system, there was a frenzy of government climate change policies that incentivized the rapid build out of a technology that still required more development to become a suitable replacement for coal and gas-fired generation. Politicians and policy makers didn’t understand the physics of power generation and were urged on by proponents of renewables and an equally uninformed public and they simply assumed that renewables could replace coal and gas-fired generators and decarbonize the power system with cheap, abundant, emissions-free, guilt-free electricity. The result was the rapid proliferation of non-dispatchable generators that did not provide reactive power or frequency support. And today we are seeing the negative operational outcomes - declining reliability, high variability, and increasing fragility in all market-based power systems.

Reactive power deficiencies are causing voltage control and stability challenges. Declining levels of system inertia are causing frequency control and contingency management challenges. And the inability to dispatch renewables is creating challenges balancing supply and demand and increasing the need for dispatchable fast-ramping resources. And the unfortunate reality is that these are problems we created by compromising on the essential characteristics our AC power systems require to operate reliably. In hindsight, the requirements for generators to be dispatchable, provide reactive power, and provide frequency support are not “barriers to entry”. They are the minimum acceptable participation requirements we need to ensure our power systems continue to be available, reliable, and operable.

Uber Knew Better

An unlikely example of the value of enforcing minimum acceptable participation requirements is Uber. Imagine for a moment if Uber had taken the same approach we took in the power industry. Imagine if the only requirement to participate as an Uber driver was to have a vehicle that could take a customer from point A to point B, with no minimum vehicle requirements or expectations. This would certainly remove “barriers to entry” and would allow bicycles, motorcycles, rickshaws, scooters, etc. to participate as Uber drivers and earn the same compensation per trip as a driver with a car or SUV.

Now imagine the customer experience. You may get a bike to take you downtown when its raining. Or if its too cold or stormy, no drivers may be available at all. Or you may get a nice comfortable car. You would have no certainty on what vehicle would show up for each trip, or if it would show up at all, because the service availability and quality would be highly variable and unreliable.

However, that’s not how Uber works. Uber has minimum requirements for vehicles to participate in the Uber “market” for drivers:

• A 4-door vehicle with independently opening doors

• 5 seatbelts

• 10 years or newer

• No salvaged or rebuilt vehicles

• No commercial branding

• No rental vehicles

• Pass a vehicle inspection

And the outcome is that you have a pretty homogenous level of service that is available and reliable in all weather conditions that many people now trust and use without hesitation. This could be seen as discriminatory to bicycles and motorcycles and rickshaws by creating barriers to entry. But the truth is that the minimum vehicle requirements are not a barrier to entry. They set the minimum acceptable standard for market participants that will ensure a relatively homogenous product with high reliability and availability that customers can trust and rely on.

Some Barriers Shouldn’t Be Removed

I know that proponents of renewable energy will not like this and I will once again be accused of being a climate denier and renewables hater, but the facts illustrate that by compromising on wind and solar generation technical connection requirements in the very beginning, we delayed the development of grid forming inverters and firming through energy storage that I believe will one day make renewable generators much more like synchronous generators. In our attempt to help, by removing “barriers to entry” and compromising on connection requirements we also removed the incentive to develop robust, dispatchable renewable generation technologies and ended up compromising overall power system reliability. Grid forming inverter technology and storage technologies are being developed now, but we have a very large installed based of legacy renewables that are not economic to upgrade with these advancements so these generators will continue to be an operational liability for power system operators for many years to come.

But that’s all water under the bridge now and we can’t change the past. We can, however, control how we move forward and shape the future of the power industry. As we contemplate market design changes in Alberta and many other electricity markets worldwide, we need to learn from this experience and get crystal clear on the differences between “barriers to entry” and “minimum acceptable participation requirements”. A discretionary service like Uber seemed to understand this from the outset, so shame on us as an industry for not understanding the importance of this for the essential service that underpins modern society and our economic prosperity.

As we move forward as an industry, we must ensure that we’re not making more compromises today with the intent of removing “barriers to entry” that set us up for future power system reliability problems. Not all barriers are bad and in some cases they help more than hinder.