Integration of variable renewable energy in power grid and industry Cédric Philibert, Renewable Energy Division, International Energy Agency

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1 Integration of variable renewable energy in power grid and industry Cédric Philibert, Renewable Energy Division, International Energy Agency International workshop on integration & interconnection, Santiago de Chile, 5 September 2018

2 2 VRE and initial concerns Germany, 1993, 0.1% wind power in total generation - Renewable energies such as sun, hydro or wind cannot cover more than 4% of our electricity consumption even in the long run Joint statement by German power utilities, published in Die Zeit, 30 July 1993, page 10 Ireland, 2003, 2% wind power in annual generation - This amount of wind generation does, however, pose an increased risk to the security and stability of the power system which the transmission system operator feels exceeds the level normally likely to be accepted by a prudent system operator. Kieran O'Brien, Managing Director of ESB National Grid, Ireland, 1 December , 20% wind power in annual generation , target, 37% wind power in annual generation

3 Variable Renewable Energy (VRE) on the rise VRE share in annual electricity generation, Source: Medium Term Renewable Energy Market Report,

4 Power (MW) 4 leading to new challenges for energy security New operational requirements Limited contribution to peak demand Net load = power demand minus wind and solar output Larger ramps Forecast 500 errors Potential overgeneration 0 00:00 12:00 00:00 12:00 00:00 12:00 00:00 12:00 00:00 12:00 Demand Net load Higher shares of variable renewables pose new challenges for power systems

5 Net load (GW) Solar and wind also change others capacity factors & profitability Maximum remains high: Scarcity Illustration of net load duration curves at different VRE shares 0.0% 2.5% 5.0% 10.0% 20.0% Changed utilisation pattern Lower minimum: Abundance Hours Peak Midmerit Midmerit Baseload Peak Baseload 5

6 6 Three main messages on system integration 1. Very high shares of variable renewables are technically possible 2. No problems at low shares, if basic rules are followed 3. Reaching high shares cost-effectively calls for a system-wide transformation Remaining system VRE FLEXIBLE Power system Generation Grids Storage Demand Side Integration

7 System integration strategies key to use wind and solar effectively Wind penetration and curtailment in selected countries, Wind penetration level in the energy mix (left axis) Curtailment rate (right axis) Grids o + o o o o o o Generation o o + o + - Operation Curtailment levels are a good indicator for successful VRE integration growing curtailment signals shortfalls in power system flexibility 7

8 Variability a familiar challenge Exceptionally high variability in Brazil, 28 June 2010 Power systems already deal with demand variability; they have flexibility available from the start. Source: ONS, Brazil 8

9 9 Properties of wind and solar and their impacts Low short run cost Non synchronous Uncertainty Variability Location constrained Modularity Stability Reserves Short term changes Asset utilisation Transmission grid Distribution grid Abundance Scarcity Seconds Years >100km <<1km Stability Balancing Profile / utilisation Location Modularity The different properties of variable renewable energy lead to different impacts on the power system.

10 10 System integration challenges emerge with increasing shares of VRE Four phases of wind and solar integration

11 11 Towards 100% renewables Phase 5 Structural surpluses emerge; electrification of other sectors becomes relevant Phase 6 Bridging seasonal deficit periods and supplying non-electricity applications; synthetic fuels Some countries already have 100% renewable electricity generation, based on hydropower.

12 Level of VRE penetration System transformation System-friendly VRE deployment Distributed resources integration 24/ 7 System services Generation time profile Technology mix Policy and market framework Grids Flexible resources planning & investments Generation Storage Demand shaping Location Integrated planning System and market operation Actions targeting VRE Actions targeting overall system 12

13 Capacity (MW) 13 Better system operation VRE forecasting Better system operations: - Dynamic generation scheduling Update schedules close to real time - Dynamic generation dispatch Short dispatch intervals - Dynamic use of the grid Update interconnection schedules close to real time; sub-hourly scheduling - Reward flexible operation Make payments based on what is helpful for the system, not just MWh Impact of scheduling interval on reserve requirements, illustration Time (hours) Actual load curve Load schedule - 15 minutes Load schedule - 60 minutes Balancing need 15 min schedule Balancing need 60 min schedule Make better use of what you have already!

14 Competitive Renewable Energy Zone (CREZ) in Texas CREZs were created as a proactive means to alleviate grid congestion by designating renewable sources in suitable areas of the grid Public Utility Commission of Texas (with ERCOT) designated CREZ in Must develop a transmission plan to deliver RE from CREZ to consumers 2006: ERCOT contracted external party to determine best wind resource zones in Texas 2007: Five CREZs based on preliminary transmission analysis and wind developer interest Source: ERCOT 14

15 15 Power plant flexibility Flexible power plants currently major source of flexibility in all power systems Technical potential is often poorly understood and/or underestimated Significant barriers hinder progress: - Technical solutions not always known - Market design favors running flat-out - Inflexible contracts with manufacturers Example North-America From baseload operation to starting daily or twice a day (running from 5h00 to 10h00 and 16h00 to 20h00) Source: NREL IEA coordinating new imitative to promote enhanced power plant flexibility

16 Multiple flexibility options Wind + PV Demand-side response Storage: pumped-hydro and batteries CSP (if good DNI) A good power mix, demand side response, and electricity storage can contribute to integrate variable renewables together with CSP 16

17 Larger power markets Increase communication and coordination between neighboring balancing areas - Better use of interconnections - Joint operations of day-ahead, intraday and realtime energy markets Examples: - Market Coupling and International Grid Control Cooperation Europe - Western Energy Imbalance Market US Uncoordinated balancing areas A. Reserve sharing Coordinated scheduling B. Consolidated C. operations Without coordination, exchanges need to be pre-negotiated bilaterally. Coordination and exchanges of information. Financial transaction volume depends on frequency of exchanges. Information exchanges via centralized or bilateral exchange Physical consolidation under vertical integration or regional/independent system operator Balancing supply and demand over larger geographic areas reduces variability and broadens the pool of available flexibility. Figure adapted from NREL (2015) Balancing Area Coordination: Efficiently integrating Renewable Energy into the Grid, Greening the Grid 17

18 18 Co-ordinated transmission network planning in Europe ENTSO-E publishes an updated Ten-Year Network Development Plan (TYNDP) every 2 years - Overview of transmission expansion plan in the next years TNYDP is a coordinated planning initiative TNYDP 2016 analyses scenarios with RE penetration 45%-60% in Identified 100 possible bottlenecks if no reinforcement solutions Source: ENTSO-E (2016), Ten-Year Network Development Plan 2016.

19 + Going beyond generation costs system value LCOE Installation costs Operation and maintenance costs (fuel, emissions) Financing cost - SV Reduced fuel and emission costs Reduced costs/ need for other generation capacity Possibly reduced grid costs and losses Increased operational costs for other power plants Additional grid infrastructure costs Curtailment LCOE and System Value (SV) are complementary: LCOE focuses on the level of the individual power plant, while SV captures system-level effects 19

20 20 Implications for deployment priorities When is electricity produced? Where is electricity produced? How is electricity produced? Traditional approach Not considered Best resources, no matter where Do not provide system services Next generation approach Optimised: best mix of wind and solar; advanced power plant design; strategic choice of location Optimised: trade-off between cost of grid expansion and use of best resources Optimised: better market rules and advanced technology allow wind and solar power to contribute to system services Next-generation wind and solar power require next generation polices.

21 21 Market design principles for flexibility Establish short-term pricing mechanisms - Liquid short-term markets are effective tools to generate short-term price signals Expose power plants & customers to time and location specific electricity prices - Price-differentials reflect flexibility constraints and can provide revenues for flexible resources on the supply and demand side Reduce entry barriers for new technologies - Focus on the required service for the system, not on a specific technology to provide it Reform institutional arrangements to avoid conflicts of interest - New players, such as demand response aggregators, need a level playing field to compete with existing options

22 22 Electric vehicles Impact on system costs Impact of smart EV charging on system costs in Thailand System costs (SC) Captures interaction effects between VRE and the power system Compares VRE to a benchmark technology in this case a Combined Cycle Gas Plant (CCGT) Adding generation cost and system cost of VRE allows direct comparison with benchmark Unmanaged charging Smart charging Solar and wind are not a complete solution: they need to be packaged with flexibility.

23 Industry represents a major issue for climate change CO 2 emissions in the 2 Degree Scenario Source: ETP 2017 Cement, iron and steel, and chemicals responsible for the bulk of remaining industrial emissions in

24 Direct electrification can take several forms in industry Electro-magnetic technologies for heating, hardening, melting Heat pumps/mechanical vapour recompression Cheap resistances in boilers or furnaces taking advantage of cheap surplus power when available Electric technologies can prove cost-competitive when they are twice as efficient, thus filling the cost gap with direct fossil-fuel use and helping integrate more renewables 24

25 Renewable power can replace fossil fuels in many uses Buildings Heating Cooking Lighting Power plants Industry Steam Force Electrolysis Transports EVs H-rich fuels Feedstock, process agents, fuel Beyond current uses, renewable electricity can replace fossil fuels in direct uses in buildings, industry and transports, directly or through electrochemistry/electrolysis 25

26 26 Most relevant areas for green hydrogen use Greening ammonia for its current industrial uses Refineries (contribute to cleaning fuels) Direct iron reduction in steelmaking NH 3 as a fuel (shipping, balancing power plants, industrial furnaces) H 2, CH 4, and synthetic HC as electro fuels Enhancing biofuels production

27 27 Summary Challenges for integrating wind and solar are often smaller than expected at the beginning - Power systems already have flexibility available for integrating wind and solar Barriers can be technical, economic and institutional - All three areas are relevant Challenges and solutions can be group according to different phases of system integration - Measures should be proportionate with the phase of system integration - Making better use of available flexibility is most often cheaper than fancy new options Integration challenges can be minimized via system friendly deployment - Integrated planning is the foundation for long term success