The Power of Transformation Main results 2

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1 Grid Integration of Wind and PV Recent IEA analysis and implications for Japan Dr. Paolo Frankl Head, Renewable Energy Division Tokyo, May 2014

2 The Power of Transformation Main results 2

3 IEEJ : May The Grid Integration of Variable All Rights Reserved. Renewables Project - GIVAR Third project phase at a glance 7 case studies covering 15 countries, >50 in-depth interviews Technical flexibility assessment with revised IEA FAST tool Detailed economic modelling at hourly resolution 3

4 IEEJ : May All Rights Reserved. Large-scale integration accomplished today, but more to come Denmark Ireland Iberia Germany Great Britain Italy NW Europe ERCOT Sweden Instantaneous shares reaching 60% and above France India Case studies Brazil Japan VRE share of total annual electricity output 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Wind 2012 PV 2012 Additional Wind Additional PV Note: ERCOT = Electricity Reliability Council of Texas, United States Source: IEA estimates derived in part from IEA Medium-Term Renewable Energy Market Report

5 What shapes the challenge? Properties of variable renewable energy (VRE) Properties of other power system components Interaction of VRE and the system shape challenge Integration challenge is system specific But: limited number of factors on each side Learning from other system contexts is possible! 5

6 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 dispatchable generation Investment opportunity India Italy Iberia (ES & PT) Brazil NW Europe Japan (East)? ERCOT (Texas, US) OECD/IEA

7 IEEJ : May Properties of variable renewables All Rights Reserved. and impact groups Systems are different impacts will vary too But common groups of effects Low short run cost Non synchronous Uncertainty Variability Distant resources Modularity Stability Seconds Reserves Short term changes Abun dance Scarcity Asset utilisation Years Transmission grid Location Distribution grid 7

8 No problem at 5% - 10%, if Power systems already deal with a vast demand variability Can use existing flexibility for VRE integration 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 8

9 Much higher shares technically feasible NW EUR Japan (East) Italy Iberia ERCOT Brazil Curtailment none low medium high VRE share 2012 FAST2 assessment: All power systems can take 25% in annual generation already today. There is no technical limit on how much variable generation a power system can absorb Uncurtailed share of VRE in power generation [%] Source: FAST2 assessment. But system transformation increased flexibility required for higher shares 9

10 Main persistent challenge: Balancing Higher uncertainty Larger and more pronounced changes Load level [MW] Net-load at different annual VRE shares Larger ramps at high shares 20% 10% 5% 2.50% 0% Smoothing effect at low shares More frequent up and down at high shares 0 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. 10 Hours

11 Load level [MW] Main persistent challenge: Utilisation Netload implies different utilisation for non-vre system Maximum remains high Scarcity % 2.5% 5.0% 10.0% 20% Changed utilisation pattern Peak Midmerit Peak Midmerit Lower minimum Abundance Baseload Baseload Hours 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. 11

12 Main short-term challenges When VRE are added to a system with adequate capacity: Situations of low load and high VRE generation VRE curtailment if flexibility insufficient Negative market prices due to inflexible generation and VRE support mechanisms Grid bottlenecks in regions with high VRE density Limitations feeding production from the distribution to the transmission grid Insufficient evacuation capacity in regions with rapid build out of new VRE capacity 12

13 Main market impacts in stable systems Shift in German spot market price structure Reduced market prices (merit order effect) Reduced operating hours (utilisation effect) Displacement effect mainly due to low short-run cost of VRE and reinforced by support policies influenced by variability, in particular PV Economic impact on gas generation result of several factors 13

14 Integration vs. transformation Classical view: VRE are integrated into the rest Integration costs: balancing, adequacy, grid Remaining system VRE More accurate view: entire system is re-optimised Total system costs Integration is actually about transformation FLEXIBLE Power system Generation Grids Storage Demand Side Integration 14

15 IEEJ : May Problems with All Rights Reserved. calculating integration costs Decomposition always challenging: Balancing, adequacy, grids Uncertainty, profile, location Unclear that all effects are covered with these practices; categories not independent Integration cost intented to measure additional costs due to variability. BUT: additional to what? Reference technology benchmark must be defined Choice of benchmark drives part of result 15

16 Savings Costs Alternative: System value Generation costsper MWh of VRE Net savingsin residual systemper MWh of VRE generation Systemvalue LCOE Benchmark VRE against net savings in residual power system more useful than trying to calculate integration costs System value depends on transformation of the system 16

17 Three pillars of system transformation Technology spread 1. Geographic Let wind and spread solar play their part Design of power plants System friendly VRE 3. Take a system wide-strategic approach to investments! 2. Make better use of what you have Investments Operations 17

18 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 Source: adapted from Agora,

19 Three pillars of system transformation Technology spread Geographic spread 2. Make better use of what you have Design of power plants System friendly VRE Balancing areas and markets: cooperation & consolidation Market and system operations Operations 19

20 2) Better system & market operation VRE forecasting Better market operations: Fast trading Best practice: ERCOT (Texas) 5 minutes Price depending on location Best practice: United States Locational Marginal Prices Better flexibility markets Updated product definitions Full remuneration of services Fully aligned trading of services and wholesale electricity Example: ERCOT market design Make better use of what you have already! 20

21 Three pillars of system transformation Technology spread 3. Take a system wide-strategic approach to investments! Geographic spread Design of power plants System friendly VRE Balancing areas and markets: cooperation & consolidation Market and system operations Operations 21

22 Transformation depends on context Stable Power Systems Sluggish demand growth Little general investment needed short-term Example: Europe Dynamic Power Systems Dynamic demand growth Large general investment needed short-term Example: Emerging economies Slow demand growth* Dynamic demand growth* * Compound annual average growth rate , slow <2%, dynamic 2%; region average used where country data unavailable This map OECD/IEA is without 2014 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. 22

23 Three pillars of system transformation Stable system Dynamic system Technology spread Geographic spread New investment required Sufficient existing flexibility resources New investment required Investments Design of power plants System friendly VRE Balancing areas and markets: cooperation & consolidation Market and system operations Operations 23

24 3) Investment in additional flexibility Four sources of flexibility Grid infrastructure Dispatchable generation Storage Demand side integration 24

25 IEEJ : May All Rights Reserved. Benefit/cost of flexibility options North West Europe - DSI Million USD per year DSI Capex CCGT Fixed Opex DSI assumed to be 8% of annual power demand: 71% made of heat and other schedulable demand (110 TWh) 29% EV demand (44 TWh) Start up costs Variable cost incl. fuel CO 2 price USD 30 per tonne Coal price USD 2.7/MMbtu Gas price USD 8/MMbtu System benefit DSI costs CO2 costs Overall system savings of 2.0 bln $/year DSI costs of 0.9 bln $/year Benefit/cost ratio: 2.2 Note: graph represents the differences between DSI scenario (DSI 8% of overall demand) and baseline scenario 25

26 IEEJ : May All Rights Reserved. Benefit/cost of flexibility options North West Europe Benefit/cost ratio 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: OECD/IEA IEA/PÖYRY 2014 DSI + IC DSI IC Storage + IC Storage Hydro capacity boost 26

27 GW GW IEEJ : May Investments in system flexibility Need for a suite of solutions No single resource does it all! Example: : very suitable, :suitable, o : neutral, : unsuitable Data: Germany 2011, 3x actual wind and solar PV capacity All Rights Reserved. Abundance Flexible generation DSI Storage Curtailment Scarcity Flexible generation DSI o Storage Curtailment Solar and wind can be abundant or scarce Day of the year Wind Solar Demand Net load Day of the year 27

28 Total systemcost (USD/MWh) IEEJ : May Cost-effective integration means All Rights Reserved. transformation of power system Legacy lowgrid costs 0%VRE +40% Legacy high grid costs 45%VREpenetration % Transformed generation and 8%DSI, lowgrid costs Grid cost DSI Fixed VRE Emissions Fuel Startup Fixed non VRE Test System / IMRES Model Large shares of VRE can be integrated cost-effectively But adding VRE rapidly without adapting the system is bound to increase costs 28

29 IEEJ : May Power plant utilisation and in stable All Rights Reserved. systems modelling results Transformation of the system Re-establishes mid-merit plants (gas) market share at the cost of baseload plants (coal) Re-establishes capacity factors of all technologies 100% 100% Non-renewable generation mix 80% 60% 40% 20% 0% 0% 30% 45% Capacity factor 80% 60% 40% 20% 0% 0% 30% 45% Baseload Legacy Mid-merit Legacy Peak Legacy Baseload Transformed Mid-merit Transformed Peak Transformed 29

30 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 30

31 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 surplus inflexible 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 31

32 Focus on Japan 1: System Operation 32

33 MW Variable renewables in the Japanese system Flexibility challenge at 15% VRE (6% PV, 9% wind) in Japan-East region Net load Wind PV Day of the year Main question: Note: Assumes full geographic aggregation, of Tokyo, Tohoku and Hokkaido EPCOs, based on simulated generation data, load data for 2011 Source: FAST2 analysis Mobilizing flexibility on an island with large shares of baseload generation 33

34 Flexibility: ask for it. and it appears A sunny 1 st May 2013 in Germany actual production German hard coal plants carry most of ramping duty in Germany Lignite and nuclear ramp as well, even nuclear at some times Source: Fraunhofer ISE Ramping costs can be minimised at low cost; retrofits are possible e.g. Flexible Coal: Evolution from Baseload to Peaking Plant (NREL, 2013) 34

35 Mean absolute error / average production IEEJ : May All Rights Reserved. VRE production forecasts Where do Japanese EPCOs stand? Forecasting of VRE production key strategy for cost-effective operation Forecasts improve dramatically with shorter horizon Real-time generation data key for short-term accuracy More mature for wind than for PV 25% 20% 15% 10% 5% 0% Accuracy of wind forecasts in Spain Forecast horizon (Hours before real-time) Source: REE 35

36 Capacity (MW) IEEJ : May All Rights Reserved. Generation and transmission schedules Are EPCOs going with the flow? Impact of scheduling interval on reserve requirements, illustration Actual load curve Load schedule - 15 minutes Time (hours) Short scheduling intervals (5min best practice) Load schedule - 60 minutes Balancing need 15 min schedule Balancing need 60 min schedule Adjust schedules up to real time (5min best practice) 36

37 System service definitions Prepared for a variable future? Are your operating reserve and system service definitions VRE ready? Example Ireland DS3 programme Inertial Response Reserve Frequency Services Ramping Voltage Services SIR FFR POR SOR TOR1 TOR2 RR Ramping 0 5s 5 90s 90s 20min 20min 12hr time Transient Voltage Response Dynamic Reactive Power Voltage Regulation Steady-state Reactive Power Network Adequacy Grid 25 Network Synchronous Inertial Response Fast Frequency Response Fast Post-Fault Active Power Recovery Ramping Margin ms s s min min hr Dynamic Reactive Power Steady-state Reactive Power Source: EirGrid 37

38 Focus on Japan 2: Flexibility investments? Grid infrastructure Dispatchable generation Storage Demand side integration 38

39 Flexibility options - Transmission Where do you get inexpensive flexibility? Interconnection can offer low-cost flexibility 39

40 Flexibility options Electricity Storage Where do you get inexpensive flexibility? Storage shows relatively high LCOF compared to other options But not only costs count also the value matters 40

41 Flexibility options DSI Where do you get inexpensive flexibility? DSI potentially very favourable benefit/cost ratio Moving demand to when wind blows and sun shines increases firm capacity credit of variable sources But what is the real potential? 41

42 Demand Side Response already present today Today s load shape already contains DSI Electric heating in Great Britain Source: GlenDimplex, 2013 Electric heating systematic demand side strategy used today Flexibility source used in UK (Island) when inflexible nuclear was added to the system 42

43 Focus on Japan 3: System friendly VRE deployment 43

44 Local hot-spots 1/2 How to get into trouble with PV Distribution of solar PV installations in the grid area of Bayernwerk AG, Bavaria, Germany

45 Local hot-spots 2/2 How to get into trouble with PV Power flows across HV-MV transformer example form Bavaria, Germany Source: Bayernwerk, Fraunhofer IWES From Transmission to Distribution From Distribution to Transmission Reverse flows no big technical issue But too high concentration can imply costly retrofits

46 Local hotspots situation in Japan Solar PV operating capacity (GW) <10kW 10kW-1MW >1MW Hokkaido Aomori Iwate Miyagi Akita Yamagata Fukushima Ibaraki Tochigi Gunma Saitama Chiba Tokyo Kanagawa Niigata Toyama Ishikawa Fukui Yamanashi Nagano Gifu Shizuoka Aichi Mie Shiga Kyoto Osaka Hyogo Nara Wakayama Tottori Shimane Okayama Hiroshima Yamaguchi Tokushima Kagawa Ehime Kochi Fukuoka Saga Nagasaki Kumamoto Oita Miyazaki Kagoshima Okinawa Source: METI, as of Dec 2013 Installed capacities are well spread! 46

47 Local hotspots situation in Japan 2.5 <10kW 10kW-1MW >1MW Solar PV registered capacity (GW) Hokkaido Aomori Iwate Miyagi Akita Yamagata Fukushima Ibaraki Tochigi Gunma Saitama Chiba Tokyo Kanagawa Niigata Toyama Ishikawa Fukui Yamanashi Nagano Gifu Shizuoka Aichi Mie Shiga Kyoto Osaka Hyogo Nara Wakayama Tottori Shimane Okayama Hiroshima Yamaguchi Tokushima Kagawa Ehime Kochi Fukuoka Saga Nagasaki Kumamoto Oita Miyazaki Kagoshima Okinawa Source: METI, as of Dec 2013 But what about the future? 47

48 Reaping technology synergies Monthly production, wind and PV, Germany, 2013 Very strong focus on PV currently in Japan Deployment of a portfolio of renewables key strategy Complementarities: wind, solar PV Flexibility: hydro power, biogas Firm capacity: biomass and geothermal Source: Fraunhofer ISE 48

49 Getting the grid - transmission Importance of coordinated development of grid and generation well understood Chicken and egg problem for first-off, distant VRE projects Competitive Renewable Energy Zones (CREZ), Texas Irish gate system Appropriate cost recovery is key What is the approach in Japan? Source: NREL CREZ, Texas 345 kv double-circuit upgrades identified in CREZ transmission plan 49

50 USD/kW Policy support to drive down costs System costs for domestic PV systems in selected markets CHINA GERMANY USA ITALY JAPAN Japan evolved from a low-cost market to highest cost market What is the reason behind the high system costs? How can the Japanese FIT system be enhanced further? 50

51 Thanks Contact : report@tky 51