The effects of reducing renewable power intermittency through portfolio diversification

Abstract

Intermittency of renewable power sources is a growing concern for grid reliability in the United States and it has not been properly addressed by public policy for very long. One simple way to mitigate this problem is to diversify the renewable energy portfolio. This work studies the case of Texas, a state that not only is the largest wind power producer in the US, but that also has faced considerable diversification in its renewable energy portfolio in the past ten years. A dispatch model is proposed to simulate how thermal generators respond to changes in the intermittency of renewable sources. Additionally, since higher renewable output usually means higher intermittency and vice-versa, a mean–variance analysis is used to study this trade-off. Results indicate that although intermittency decreases the reliability of the grid, reducing it can have adverse effects as increasing the dispatch of polluting power sources and decreasing the revenues of thermal generators, what can decrease important investment in dispatchable power sources in the long-term. Also, results show that the subsidy design adopted by the federal government is an obstacle to portfolio diversification.