The power of transformation. wind, sun and the economics of flexible power systems.

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The power of transformation. wind, sun and the economics of flexible power systems.

  1. 1. © OECD/IEA 2014 The Power of Transformation Wind, Sun and the Economics of Flexible Power Systems GSE, Rome, 8 July 2014
  2. 2. © OECD/IEA 2014 Main Results and Strategic Approach Ms Maria van der Hoeven Executive Director International Energy Agency © OECD/IEA 2014 2
  3. 3. © OECD/IEA 2014 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Japan Brazil India France Sweden ERCOT NW Europe Italy Great Britain Germany Iberia Ireland Denmark Wind 2012 PV 2012 Additional Wind 2012-18 Additional PV 2012-18 VRE share of total annual electricity output Note: ERCOT = Electricity Reliability Council of Texas, United States Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report 2013. Large-scale integration accomplished today, but more to come Case studies © OECD/IEA 2014 3 • Instantaneous shares reaching 60% and above • Higher shares locally: Wind in Tamil Nadu (India) approx. 13% Iberian pen.
  4. 4. © OECD/IEA 2014 1. Very high shares of variable renewables are technically possible 2. No problems at low shares, if … 3. Reaching high shares cost-effectively calls for a system-wide transformation Three main results © OECD/IEA 2014 4
  5. 5. © OECD/IEA 2014 Three pillars of system transformation Grid infrastructure Dispatchable generation Storage Demand side integration © OECD/IEA 2014 5 1. Deploy state-of-the art system friendly VRE 2. Improve market design and operations 3. Invest in four sources of flexibility
  6. 6. © OECD/IEA 2014 Focus on key findings Dr. Paolo Frankl Head, Renewable Energy Division © OECD/IEA 2014 6
  7. 7. © OECD/IEA 2014 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 © OECD/IEA 2014 7
  8. 8. © OECD/IEA 2014 Interaction is key Properties of variable renewable energy (VRE) Flexibility of other power system components © OECD/IEA 2014 8  Variable  Uncertain  Non-synchronous  Location constrained  Modularity  Low short-run cost sec yrs 1 km 100s km Grids Generation Storage Demand Side
  9. 9. © OECD/IEA 2014 The GIVAR III case study regions Power area size (peak demand) Grid strength Inter- connection (actual & potential) No. of power markets Geographic spread of VRE Flexibility of dispatchable generation Investment opportunity India Italy Iberia (ES & PT) Brazil NW Europe ERCOT (Texas, US) Japan (East) ? © OECD/IEA 2014 9
  10. 10. © OECD/IEA 2014  Power systems already deal with a vast demand variability  Can use existing flexibility for VRE integration No problem at 5% - 10%, if … © OECD/IEA 2014 10 Exceptionally high variability in Brazil, 28 June 2010  No technical or economic challenges at low shares, if basic rules are followed:  Avoid uncontrolled, local ‘hot spots’ of deployment  Adapt basic system operation strategies, such as forecasts  Ensure that VRE power plants are state-of-the art and can stabilise the grid
  11. 11. © OECD/IEA 2014  FAST2 assessment:  Assumption: perfect grid (copper-plate), system operation maximises flexibility  Result: all power systems can take 25% in annual generation  There is no technical limit on how much variable generation a power system can absorb  But system transformation increased flexibility required for higher shares Much higher shares technically feasible © OECD/IEA 2014 11 0 10 20 30 40 50 60 Brazil ERCOT Iberia Italy Japan (East) NW EUR Uncurtailed share of VRE in power generation [%] Curtailment none low medium high VRE share 2012 Source: FAST2 assessment.
  12. 12. © OECD/IEA 2014 Current levels of VRE Curtailment © OECD/IEA 2014 12  Spain: reasons: 20% network constraints, 80% system-wide reasons  ERCOT: curtailment peaked at 17% in 2009, market reform in 2010 and continued grid expansion main factors for ten-fold reduction  Germany: total curtailed energy: 385 GWh 2012, 421 GWh in 2011, 127 GWh in 2010 Curtailments remain low, almost 100% of available VRE is used 0% 5% 10% 15% 20% Wind Wind PV Wind Wind Wind PV Ireland (2012) Italy (2013) Spain (2012) ERCOT (2013) Germany (2012) Annualshareingeneration Used Wind Curtailed Wind Used PV Curtailed PV
  13. 13. © OECD/IEA 2014 Main persistent challenge: Balancing Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only. © OECD/IEA 2014 13 0 10 20 30 40 50 60 70 80 1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Hours Netload(GW) 0.0% 2.5% 5.0% 10.0% 20.0% Larger ramps at high shares  Higher uncertainty  Larger and more pronounced changes Illustration of Residual power demand at different VRE shares
  14. 14. © OECD/IEA 2014  Netload implies different utilisation for non-VRE system Main persistent challenge: Utilisation Note: Load data and wind data from Germany 10 to 16 November 2010, wind generation scaled, actual share 7.3%. Scaling may overestimate the impact of variability; combined effect of wind and solar may be lower, illustration only. © OECD/IEA 2014 14 0 10 20 30 40 50 60 70 80 90 1 2 000 4 000 6 000 8 000 Netload(GW) Hours 0.0% 2.5% 5.0% 10.0% 20.0% Maximum remains high: Scarcity Lower minimum: Abundance Changed utilisation pattern Base- load Mid- merit Peak Mid- merit Peak Mid- merit Base- load - -
  15. 15. © OECD/IEA 2014 0 20 40 60 80 100 120 140 Legacy low grid costs Legacy high grid costs Transformed generation & 8% DSI, low grid costs 0% VRE Totalsystemcosts(USD/MWh)  Fixed costs of un-adapted power plant fleet largest cost driver  Uncoordinated grid retrofits can be expensive  Startup costs have low impact Adding VRE without adapting the system is bound to increase costs © OECD/IEA 2014 15 Test System / IMRES Model 45% VRE penetration Grid cost DSI Fixed VRE Emissions Fuel Startup Fixed non-VRE +40%
  16. 16. © OECD/IEA 2014 2. Make better use of what you have Operations 1. Let wind and solar play their part 3. Take a system wide-strategic approach to investments! System friendly VRE Technology spread Geographic spread Design of power plants Three pillars of system transformation © OECD/IEA 2014 16 Investments
  17. 17. © OECD/IEA 2014 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! Take a system perspective when deploying VRE Market premiums step in right direction Source: adapted from Agora, 2013 Example: System friendly design of wind turbines reduces variability © OECD/IEA 2014 17
  18. 18. © 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  Align system and market operation Example: US Independent System Operators  Make better use of what you have already! Example: ERCOT market design © OECD/IEA 2014 18
  19. 19. © OECD/IEA 2014 3) Investment in additional flexibility Grid infrastructure Dispatchable generation Storage Demand side integration Four sources of flexibility … © OECD/IEA 2014 19
  20. 20. © OECD/IEA 2014 Benefit/cost of flexibility options North West Europe – Demand Side Integration (DSI)  Overall system savings of 2.0 bln $/year  DSI costs of 0.9 bln $/year Note: graph represents the differences between DSI scenario (DSI 8% of overall demand) and baseline scenario Benefit/cost ratio: 2.2 © OECD/IEA 2014 20 DSI assumed to be 8% of annual power demand: • 70% made of heat and other schedulable demand (110 TWh) • 30% EV demand (44 TWh) CO2 price USD 30 per tonne Coal price USD 2.7/MMbtu Gas price USD 8/MMbtu -29 -140-437 -1 539 899 128 -2 500 -2 000 -1 500 -1 000 - 500 0 500 1 000 1 500 System benefit DSI costsMillionUSDperyear DSI CapexCCGT Fixed Opex Startup costs Variablecost incl. fuel CO2 costs  Basic approach: 1. Establish baseline scenario using ‘business as usual’ at 30% VRE 2. Insert DSI and calculate savings compared to baseline (system benefit) 3. Compare system benefit to DSI cost
  21. 21. © OECD/IEA 2014 Benefit/cost of flexibility options North West Europe  DSI has large benefits at comparably low costs  Interconnection allows a more efficient use of distributed flexibility options and generates synergies with storage and DSI  Cost effectiveness of hydro plant retrofit depend on project specific measures and associated investment needs Notes: 1) CAPEX assumed for selected flexibility options: interconnection 1,300$/MW/km onshore and 2,600$/MW/km offshore, pumped hydro storage 1,170$/kW, reservoir hydro 750 $/kW -1,300$/kW (repowering of existing reservoir hydro increasing available capacity). Cost of DSI is assumed equal to 4.7 $/MWh of overall power demand (adjustment of NEWSIS results) 2) Fuel prices and CAPEX ($/kW) for VRE and flexibility options are assumed constant across all scenarios Source: IEA/PÖYRY 2,3 2,2 1,2 1,1 1,1 0.6 - 1.5 DSI + IC DSI IC Storage + IC Storage Hydro capacity boost Benefit/cost ratio 1 © OECD/IEA 2014 21
  22. 22. © OECD/IEA 2014 0 20 40 60 80 100 120 140 Legacy low grid costs Legacy high grid costs Transformed generation & 8% DSI, low grid costs 0% VRE Totalsystemcosts(USD/MWh)  Large shares of VRE can be integrated cost-effectively  Significant optimization on both fixed and variable costs Cost-effective integration means transformation of power system © OECD/IEA 2014 22 Test System / IMRES Model 45% VRE penetration Grid cost DSI Fixed VRE Emissions Fuel Startup Fixed non-VRE +40% +10-15%
  23. 23. © OECD/IEA 2014  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 Recommendations 1/2 © OECD/IEA 2014 23
  24. 24. © OECD/IEA 2014 * Compound annual average growth rate 2012-20 , slow <2%, dynamic ≥2%; region average used where country data unavailable 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. Transformation depends on context Recommendations 2/2 © OECD/IEA 2014 24 Stable Power Systems • Little general investment need short term Dynamic Power Systems • Large general investment need short term Slow demand growth* Dynamic demand growth* Maximise the contribution from existing flexible assets Decommission or mothball inflexible polluting surplus capacity to foster system transformation Implement holistic, long-term transformation from onset Use proper long-term planning instruments to capture VRE’s contribution at system level
  25. 25. © OECD/IEA 2014  Round Table © OECD/IEA 2014 25

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