Benefit Cost Analysis of Improved Forecasting for Day-Ahead Hourly Regulation Requirements

A benefit cost analysis (BCA) of the Day-Ahead Regulation Prediction (DARP) tool found substantial savings to providing an improved forecast of the California Independent System Operators (CAISO) reserve requirements for regulation services with increasing amounts of solar generation. DARP predicts day-ahead reserve requirements for Regulation Up (Reg Up) and Regulation Down (Reg Down) using the balancing authority’s Area Control Error (ACE) and actual frequency. The BCA approach statistically estimated the price-quantity relationships for Reg Up and Reg Down. The estimated changes in Regulation reserve prices along with the estimated changes in day-ahead reserve requirements, forecast by DARP, provide a cost savings estimate. The results indicate that more savings were found for reducing Reg Up than reducing Reg Down purchases. A similar approach may be used to estimate savings from improved forecasting of reserves for other ancillary services, or to estimate benefits from other forecasting tools and methodologies.