The Power of Transformation Wind, Sun and the Economics of Flexible Power Systems by Kanaga Gnana

The Power of Transformation Wind, Sun and the Economics of Flexible Power Systems

Press Conference, 26 February 2014, Paris ÂŠ OECD/IEA 2014

Main Results Ms Maria van der Hoeven Executive Director International Energy Agency

Current VRE shares and mid-term forecasts Denmark Ireland Iberia Germany

Great Britain Italy

Instantaneous shares reaching 60% and above

NW Europe ERCOT

Sweden France India Brazil

VRE share of total annual electricity output

Japan 0%

10%

15%

Wind 2012

20%

25%

30%

40%

45%

PV 2012

Source: IEA statistics; note ERCOT = Electricity Reliability Council of Texas, United States

35%

Current VRE shares and mid-term forecasts Denmark Ireland Iberia Germany

Great Britain Italy

Instantaneous shares reaching 60% and above

NW Europe ERCOT

Sweden France India Brazil

VRE share of total annual electricity output

Japan 0%

Wind 2012

10% PV 2012

15%

20%

25%

30%

Additional Wind 2012-18

35%

45%

Additional PV 2012-18

Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report 2013.

ÂŠ OECD/IEA 2014

40%

ÂŠ OECD/IEA 2014

Current VRE shares and mid-term forecasts Denmark Ireland Iberia Germany

Great Britain Italy

Instantaneous shares reaching 60% and above

NW Europe ERCOT

Sweden France India Brazil

VRE share of total annual electricity output

Japan

Case studies

Wind 2012

10% PV 2012

15%

20%

25%

30%

Additional Wind 2012-18

35%

45%

Additional PV 2012-18

Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report 2013.

ÂŠ OECD/IEA 2014

40%

ÂŠ OECD/IEA 2014

Three main results 1.

Very high shares of variable renewables are technically possible

No problems at low shares, if …

Reaching high shares cost-effectively calls for a system-wide transformation

Integration means transformation  Classical view: VRE are

forced into the rest without adaptation

Remaining system

VRE

Integration means transformation  Classical view: VRE are

forced into the rest without adaptation

Remaining system

VRE

 More accurate view:

entire system is re-optimised Integration is actually

about transformation © OECD/IEA 2014

FLEXIBLE Power System • Generation • Grids • Storage • Demand Side Integration © OECD/IEA 2014

Transformation depends on context

• Sluggish demand growth • Little general investment needed short term

Dynamic Power Systems • Dynamic demand growth • Large general investment needed short term

Example: Europe

Example: Emerging economies

Stable Power Systems

Slow demand growth* Dynamic demand growth*

* Compound annual average growth rate 2012-20 , slow <2%, dynamic ≥2%; region average used where country data unavailable © OECD/IEA 2014 This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Focus on key findings Dr. Paolo Frankl Head, Renewable Energy Division

The Grid Integration of Variable Renewables Project - GIVAR  Third project phase  7 case studies covering 15 countries, >50 in-depth interviews  Technical flexibility assessment with revised IEA FAST tool 2.0  Detailed economic modelling at hourly resolution

The 6 VRE properties that matter  Variable

yrs

 Maximum output varies depending on wind and sunlight

 Uncertain  No perfect forecast for wind and sunlight available

 Non-synchronous technologies

sec 100s km

1km

 VRE connect to grid via power electronics, have little or no rotating mass

 Location constrained  resource is not equally good in all locations and cannot be transported

 Modularity  Wide range of sizes and may be much smaller than other options

 Low short-run cost © OECD/IEA 2014

 Once built, VRE generate power almost for free

The GIVAR III case study regions Power area size (peak demand)

Grid strength

Interconnection (actual & potential)

No. of power markets

Geographic spread of VRE

Flexibility of Investment dispatchable opportunity generation

India Italy Iberia (ES & PT) Brazil NW Europe Japan (East) ERCOT (Texas, US)

? © OECD/IEA 2014

The GIVAR III case study regions Power area size (peak demand)

Grid strength

Interconnection (actual & potential)

No. of power markets

Geographic spread of VRE

Flexibility of Investment dispatchable opportunity generation

India Italy Iberia (ES & PT) Brazil NW Europe Japan (East) ERCOT (Texas, US)

? © OECD/IEA 2014

Three pillars of system transformation

Technology spread

Geographic spread Design of power plants

1. Let wind and solar play their part

System friendly VRE

1) System friendly VRE deployment Example: System friendly design of wind turbines reduces variability

Source: adapted from Agora, 2013

1) System friendly VRE deployment  Wind and solar PV

can contribute to grid integration  But only if they are allowed and asked to do so!

Example: System friendly design of wind turbines reduces variability

Take a system

perspective when deploying VRE © OECD/IEA 2014

Source: adapted from Agora, 2013

Three pillars of system transformation

Technology spread

Geographic spread

System friendly VRE

ÂŠ OECD/IEA 2014

Balancing areas and markets: cooperation & consolidation Market and system operations

Operations

Design of power plants

2. Make better use of what you have

ÂŠ OECD/IEA 2014

2) Better system & market operation  VRE forecasting  Better market operations:  Fast trading Best practice: US (Texas) – 5 minutes

 Price depending on location Best practice: US – Locational Marginal Prices

 Better flexibility markets Example: Fully remunerated reserve provision

Make better use of what

you have already!

2) Better system & market operation  VRE forecasting  Better market operations:  Fast trading

Example: ERCOT market design

Best practice: US (Texas) – 5 minutes

 Price depending on location Best practice: US – Locational Marginal Prices

 Better flexibility markets Example: Fully remunerated reserve provision

Make better use of what

you have already!

Three pillars of system transformation

Technology spread

3. Take a system wide-strategic approach to investments!

Geographic spread

System friendly VRE

ÂŠ OECD/IEA 2014

Balancing areas and markets: cooperation & consolidation Market and system operations

Operations

Design of power plants

ÂŠ OECD/IEA 2014

3) Investment in additional flexibility Four sources of flexibility …

Grid infrastructure

Dispatchable generation

Storage

Demand side integration

Three pillars of system transformation Stable system

Geographic spread

System friendly VRE

ÂŠ OECD/IEA 2014

Sufficient existing flexibility resources

Balancing areas and markets: cooperation & consolidation Market and system operations

Operations

Design of power plants

New investment required

Investments

Technology spread

New investment required

Dynamic system

ÂŠ OECD/IEA 2014

System costs and transformation Total system cost (USD/MWh)

140

Grid cost

120

DSI

100 80

Fixed VRE

Emissions

Fuel

20 0

Legacy low grid costs 0% VRE

ﾂｩ OECD/IEA 2014

Legacy high grid costs

Transformed generation and 8% DSI, low grid costs 45% VRE penetration

Startup Fixed non窶天RE

ﾂｩ OECD/IEA 2014

System costs and transformation Total system cost (USD/MWh)

140

Grid cost

120

+10-15%

100

DSI

Fixed VRE

Emissions

Fuel

20 0

Legacy low grid costs 0% VRE

Legacy high grid costs

Transformed generation and 8% DSI, low grid costs 45% VRE penetration

Startup Fixed non–VRE

 Large shares of VRE can be integrated cost-effectively

System costs and transformation Total system cost (USD/MWh)

140

Grid cost

+40%

120

+10-15%

100

DSI

Fixed VRE

Emissions

Fuel

20 0

Legacy low grid costs 0% VRE

Legacy high grid costs

Transformed generation and 8% DSI, low grid costs 45% VRE penetration

Startup Fixed non–VRE

 Large shares of VRE can be integrated cost-effectively

 But adding VRE rapidly without adapting the system is bound to

Investments in system flexibility – Need for a suite of solutions  No single resource does

it all!

Investments in system flexibility – Need for a suite of solutions it all!  Example:  Abundance  Flexible generation    DSI   Storage   Curtailment 

  : very suitable,  :suitable, o : neutral,   : unsuitable Data: Germany 2011, 3x actual wind and solar PV capacity © OECD/IEA 2014

Solar and wind can be abundant … 80 60 40

 No single resource does

20 0

-20

33 Wind

Day of the year Solar Demand

39 Net load

Investments in system flexibility – Need for a suite of solutions

 Abundance  Flexible generation    DSI   Storage   Curtailment 

 Multi-day scarcity  Flexible generation    DSI o  Storage   Curtailment     : very suitable,  :suitable, o : neutral,   : unsuitable Data: Germany 2011, 3x actual wind and solar PV capacity © OECD/IEA 2014

80 60 40

it all!  Example:

Solar and wind can be abundant …

20 0

-20

33 Wind

… or scarce.

Day of the year Solar Demand

39 Net load

80 60 40

 No single resource does

20 0

-20

321 322 323 324 325 326 327

Day of the year

Recommendations 1/2  All countries where VRE is going mainstream should:  Optimise system and market operations  Deploy VRE in a system-friendly way to maximise their value to the overall system  Countries beginning to deploy VRE power plants (shares

of up to 5% to 10% of annual generation) should:  Avoid uncontrolled local concentrations of VRE power plants (“hot spots”)  Ensure that VRE power plants can contribute to stabilising the grid when needed  Use state of the art VRE forecast techniques © OECD/IEA 2014

Recommendations 2/2  Countries with stable power systems should seek to  Maximise the contribution from existing flexible assets  Consider accelerating system transformation by decommissioning or mothballing inflexible surplus capacity  Countries with dynamic power systems should  Approach VRE integration as a question of holistic, long-term system transformation from the onset  Use energy planning tools and strategies that appropriately represent VRE’s contribution at system level

Q&A