System Integration of renewables Focus on electrification

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System Integration of renewables Focus on electrification Simon Müller Head - System Integration of Renewables Unit IEA Wind Europe, Brussels, 21 March 2018

IEA System Integration of Renewables analysis at a glance Over 10 years of system integration work at the IEA - Grid Integration of Variable Renewables (GIVAR) Programme - Dedicated Unit on System Integration since June 2016 - Part of delivering the IEA modernisation strategy 2011 2014 2016 2017 2017 Technical Framework, Technology, Economics Policy Implementation Progress & Tracking 2

3 Questions What is the energy system of the future and is wind suited to it? Which sectors will electrify first and how will this impact load management on local, country and regional level? What will other sectors expect form variable renewable energy in order to use it as a source for their electrification? 3

Renewables growth more and more dependent on wind and solar 1 200 1 000 800 600 400 200 0 Capacity growth (GW) Renewable electricity capacity growth by technology 1999-2004 2005-10 2011-16 2017-22 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Additional - accelerated case Others Hydropower Solar PV Wind % from wind and solar PV (right axis) Solar PV enters a new era, becoming the undisputed leader in renewable power capacity growth; PV also accounts for 60% of the upside potential in the accelerated case Source: Renewables 2017 4

Competition driving costs down Announced wind and solar PV average auction prices by commissioning date USD/MWh 180 160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Onshore wind average auction price Solar PV average auction price Price discovery through competitive auctions effectively reduces costs along the entire value chain; Auctions with long-term contracts will drive almost half of new capacity growth over 2017-22 5

Variable Renewable Energy (VRE) on the rise Denmark Ireland Spain Germany UK Belgium Italy Mexico Australia USA China Chile India Brazil VRE share in annual electricity generation, 2016-22 0% 10% 20% 30% 40% 50% 60% 70% 80% % of total generation PV share in 2016 Wind share in 2016 Additional PV share in 2022 Additional wind share in 2022 Also Experience in emerging has shown economies that cost-effective and in large power system systems integration the share of high of VRE shares is expected of variable to renewables double to over is possible with 10% the right in just policies five years. and investments Source: Renewables 2017 6

Renewables dominate capacity additions to meet sustainability goals Global net capacity additions 2016 2040 in the WEO Sustainable Development Scenario Renewables account for 63% of total world electricity generation by 2040 in the SDS, with wind and hydro becoming the largest sources of generation. China and India account for over 40% of net renewable additions. 7

Different Phases of VRE Integration Phase Description 1 VRE capacity is not relevant at the all-system level 2 VRE capacity becomes noticeable to the system operator 3 Flexibility becomes relevant with greater swings in the supply/demand balance 4 5 6 Stability becomes relevant. VRE capacity covers nearly 100% of demand at certain times Structural surpluses emerge; electrification of other sectors becomes relevant Bridging seasonal deficit periods and supplying non-electricity applications; seasonal storage and synthetic fuels 8

Differentiating flexibility needs Flexibility type Ultra-short term flexibility Very short-term flexibility Short term flexibility Medium term flexibility Long term flexibility Time-scale Sub-seconds to seconds Seconds to minutes Minutes to days Days to weeks Months to years Issue Ensure system stability (voltage, transient and frequency stability) at high shares of non-synchronous generation Short term frequency control at high shares of variable generation Meeting more frequent, rapid and less predictable changes in the supply / demand balance Addressing longer periods of surplus or deficit of variable generation, mainly driven by presence of a specific weather system Balancing seasonal and inter-annual availability of variable generation with power demand Priority from Phase IV Phase III Phase II Phase IV Phase V Flexibility is needed across different time scales. 9

VRE deployment phase in selected countries VRE share in annual electricity generation and system integration phase, 2016 50% % of VRE generation 40% 30% 20% 10% 0% Phase 1 - no relevant impact Phase 2 - Impact on the net load Phase 3 - Flexibility is key Phase 4 - Short-term stability Each VRE deployment phase can span a wide range of VRE share of generation; there is no single point at which a new phase is entered AU: Australia; CN: China; DE: Germany; DK: Denmark; ES: Spain; GR: Greece; ID: Indonesia; IE: Ireland; IN: India; IT: Italy; PT: Portugal; SE: Sweden; US: United States; UK: the United Kingdom; ZA: South Africa. 10

A system-wide approach for system flexibility (Phases 3 and 4) Roles and responsibilities / Planning Architecture System operation and market rules System services, spot markets, resource adequacy Software Systemfriendly VRE Dispatchable generation Demand shaping Grid and connectivity Storage Hardware Technical, economic and institutional policy layers mutually influence each other and have to be addressed in consistent way 11

Sector coupling conceptual map (Phases 5&6) Thermal power plants VRE plants ELECTRICITY SUPPLY SYSTEM Co-generation plants FUEL SUPPLY Transmission and distribution grid Fossil fuels, biomass, etc PtX Electricity storage Individual or Collective heating/cooling distribution system HEATING/COOLING GENERATION Heat boilers Geothermal and solar heat Heat pumps/ac Electric boilers 12

Electrification: what sectors will go first and what will be impact? Political / societal pressure to electrify - E.g. passenger cars / short-haul trucks - Impact: depends on how it is used (next slide) Options to make use of abundant VRE / provide flexibility - First: use of existing assets with low CAPEX retrofit possibility - Prime example: electricity boilers in CHP plants / district heating networks More cost-effective than current fossil options - Substitution of fossil fuels thanks to cheap electricity - Impact: could create a rather inflexible load, depends on capital costs 13

Potential impact of electrification on electricity demand 40000 35000 30000 25000 20000 15000 MW 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 hour Wind Solar PV Demand Net Demand Net demand with unmanaged EVs charging Net demand with managed EVs charging Smart sector coupling will need to take VRE deployment into account to avoid exacerbating net demand load changes 14

Expectations from the electricity source: sufficient utilisation Capital costs put pressure on per unit costs proportionate to 1 Utilization Cost of Hydrogen from alkaline water electrolysis Possible to have layered approaches to electrification - Options that run only a few 100 hours will need to be very cheap, but can be inefficient - Longer utilization range with higher capital cost Don t assume that electrification serves to deal just with surplus from variable electricity supply 15

Capital efficiency as a paradigm to guide electrification Old efficiency paradigm driven by: effect of capital utilization buffered by fossil fuel flexibility - Value of energy savings dominated by offset fuel type, best time and location follow simple patterns - Flexibility of fossil fuels (storability and transportability) -> capital savings (upstream oil + gas) - Peak demand defines moment of most expensive supply - This reflects possible inefficient use of power plants and grids in electricity system New efficiency paradigm: capital utilization directly coupled across energy system - Value of energy savings depends on offsetting cost of match making, best time and location have a complex pattern and optimum changes with innovation - Most costly match making defines moment of most expensive supply - This reflects possible inefficient use of flexibility assets in electricity system 16

simon.mueller@iea.org 17