Renewables Integration and Optimal Market Size

The Capstone team sought to answer the question: "What is the optimal size for an Independent System Operator (ISO)/ Regional Transmission Organization (RTO), and what influence would an increase in the penetration of renewable energy generation have on this optimal size?"

Focusing on National Grid's current markets, the Capstone team looked at the specific case of a potential increase in integration between New York ISO and New England ISO. The research pointed to four major areas of potential benefit:

1. Production costs across the two ISOs can be reduced by more efficient dispatch if coordination can be improved.

2. The system cost of integrating renewables is decreased because of a portfolio effect. Further, more optimal siting of wind resources bring additional financial benefit if regional electric companies (RECs) are fungible across both regions.

3. Significant administrative costs could be saved, but only with institutional changes accompanying a full merger.

4. There is potential for reserve requirement reduction.

The Capstone team provided estimates for the order of magnitude of these effects. These benefits are only accessible once significant barriers have been overcome. Of the four areas of implementation difficulty, the interviewees spoke of (political, technical, economic, and institutional), political and institution were described as the most prohibitive.