A study by Bloomberg New Energy Finance (BNEF) crunches the numbers to show the need for flexible resources to offset increased short-term volatility in supply as solar and wind gradually dominate electricity generation.

 

Beyond the Tipping Point: Flexibility gaps in future high-renewable energy systems in the UK, Germany and Nordics was commissioned by Eaton in partnership with the UK Renewable Energy Association (REA), with key findings presented by Eaton at the Energy Storage & Connected Systems event in London, 6-7 February 2018.

Across Europe, the cost of generating energy from wind and solar PV is expected to more-than-halve from 2017 to 2040, according to BNEF, resulting in widespread adoption of these technologies.

Falling costs of lithium-ion batteries also make short-term energy storage economic for a range of applications, including reducing peak system requirements.

 

Tipping points

The 172-page study identifies three tipping points towards a high renewables future. The first, when wind and solar, rather than new gas or coal plants, become the cheapest option for new power generation, has already been reached in many European markets, making renewables the lowest-cost option for new electricity supply.

When new-build renewables beat existing coal and gas (Source: Bloomberg New Energy Finance)

The second tipping point will arrive when energy from new-build wind and solar becomes cheaper than that from existing fossil capacity. By the end of the 2020s, most wind and solar project lifetime costs are expected to be lower than the cost of continuing to run existing gas and coal plants.

The third and final tipping point is when rooftop solar PV electricity generation becomes cheaper than buying energy from the grid. Much of Europe has crossed this economic tipping point. Future additions will be driven by factors that include consumer adoption and local regulatory frameworks.

Precisely when adding a battery to rooftop PV starts to make economic sense will vary by country, depending on the solar resource, retail power tariffs and structures, plus the availability of complementary value streams for storage, such as participation in aggregated virtual power plants to provide balancing services, for example.

 

The UK’s renewables outlook

According to the study in the UK, wind and solar combined could account for 39% of power generation by 2030, and 50% by 2040, growing by 45GW over 2017-40.

Today, variable renewable generation (wind and solar) rarely meets more than 25% of hourly demand in the UK, but by 2040, these resources will contribute to more than 49% of hourly demand for over half of the year.

In 2030, less than 1% of wind and solar generation is curtailed or ‘wasted’. By 2040, this rises to 3%. By then, in terms of time the period when output will exceed demand equates to roughly a month. However, grid and other constraints could, in reality, lead to higher levels of curtailment.

Energy storage, as well as flexible demand loads, like electric vehicle (EV) charging and industrial processes, can all make use of surplus renewable energy. Interconnectors will also enable export when needed.

 

Flexibility opportunities in the UK

To match wind and solar production rises and falls as well as increases and decreases in demand, flexible resources will need to ramp up or down to balance the system hour to hour.

According to BNEF, in 2017 the maximum ramp rates are 10GW/hour up and 11GW/hour down, representative of roughly one-third of the UK gas fleet turning on or off in an hour. But by 2040, the highest ramps will be 21GW up and 25GW down, equivalent to around a quarter of the UK’s entire generation fleet turning on or off in one hour.

Fast-ramping resources, such as energy storage, plus certain types of demand side response, and gas generators, will support ramping requirements. As extreme ramp rates can cause conventional generators to operate less efficiently, flexible demand and storage can help mitigate these impacts.

The increase in volatility means that by 2030, there will be whole weeks where wind and solar generation exceeds demand at some point every day, diminishing the need for ‘baseload’ technologies that need to run flat-out, such as nuclear power.

Despite growth in wind and solar, total back-up capacity needed in 2040 will be much the same as today, and it will be used less often, adversely impacting the economics of certain plants, like combined cycle gas turbines (CCGTs).

By then 70GW of dispatchable resources, consisting of a mix of generation, storage, flexible demand, interconnectors, will be needed to meet peak demand during periods of low wind and solar generation.

A future UK energy system dominated by variable renewable energy must be complemented by flexible resources, like battery storage and flexible demand, to address short-term volatility issues arising from renewables, finds the report.

However, these technologies will not be well-suited to providing back-up for weeks and months when wind and solar resources are insufficient to meet demand.

To meet these longer-term gaps will require dispatchable and, ideally, flexible sources. Currently, only pumped hydro, interconnectors and gas generation can do this economically. Hydrogen storage would require significant cost reductions.

Still, even at about 50% wind and solar, the opportunities and need for inter-seasonal storage are limited. Short-term storage provides most of the flexibility the system requires at this level of wind and solar penetration.

 

Impact of storage/energy time-shifting on back-up

(Source: Bloomberg New Energy Finance)

The highest peaks – hours when almost all peak load has to be met using back-up capacity – can be reduced using short-duration storage. As the length of the period over which energy is shifted increases, so does the amount energy that needs to be stored. But these short, high peaks only account for a small amount of back-up capacity.

To reduce back-up capacity by a lot, longer storage/energy time-shifting is needed. In 2017, an energy shift of two hours is enough to reduce required back-up capacity by 19% but to reduce it by 27% requires the ability to shift for up to 24 hours.

If storage/energy time-shifting can reduce back-up capacity requirements, this will effectively improve utilisation and economics of the remaining back-up generators.

 

Germany’s renewables outlook

In Germany, wind and solar capacity is expected to grow by 127GW over 2017-40 on the back of widespread solar PV deployment – primarily small-scale PV installations, as a result of high retail prices. By 2040 renewables will account for three-quarters of Germany’s electricity supply.

Wind capacity over the same period will grow by a mere 18GW as falling demand and vast solar additions limit its deployment. High-efficiency coal and lignite plants mean Germany will keep around 50GW of fossil fuel capacity online in 2040, down from 71GW in 2017.

Today, variable renewable generation (wind and solar) rarely meets more than 37% of hourly demand but by 2040, these resources contribute to more than 71% of hourly demand for over half of the year.

In Germany in 2030, some 3% of wind and solar generation will be curtailed, rising to 16% by 2040. In other words, when output exceeds demand will be equivalent to roughly one fourth of the year, without accounting for grid and other constraints, which could increase curtailment levels.

 

Flexibility opportunities in Germany

Like the UK, Germany will see growing opportunities for energy storage, or flexible demand loads, like EV charging and industrial processes, to make use of surplus renewable energy. Interconnectors, too, will also play an important role, for exporting.

As wind and solar production rise and fall, and demand increases and decreases, other flexible resources will need to ramp up or down to balance them from hour to hour. According to BNEF, today maximum ramp rates in Germany are 13GW/hour up and 11GW/hour down, representative of nearly half of the German gas fleet turning on or off in an hour.

By 2040, the highest ramps will be 38GW up and 34GW down – equivalent to around 40% of Germany’s dispatchable generation fleet turning on or off in one hour.

As in the UK, increasing opportunities will emerge for fast-ramping resources, such as energy storage, certain types of demand response, and gas generators, to support needed levels of ramping.

The increase in volatility means that as early as 2030, there will be whole weeks where wind and solar generation exceeds demand at some point every day, creating a challenging environment for ‘baseload’ technologies that benefit from running at a constant stable output, such as lignite.

Today in Germany, the highest renewables output periods are during winter, when the wind blows the most. However, as more solar is deployed, by 2040 summer output will be on a par with winter. The share of wind and solar generation will be high in summer as well as winter, due to lower demand.

By 2040, the highest wind and solar output periods will see more generation from these sources than total demand. Energy storage and flexible demand will help match supply and demand.

As the timeframe lengthens, generation from variable renewables moves closer to the yearly average. The highest-output month sees wind and solar generation equivalent to 78% of demand.

However, even in 2040, there will be entire weeks and months where non-wind/solar generation must meet 85% and 63% of demand, respectively.

Therefore total back-up capacity needed in 2040 is much the same as today in Germany. Some 97GW of dispatchable resources, such as generation, storage, flexible demand, interconnectors, will be needed in 2040 to meet peak demand during periods of low wind and solar generation.

Again, like the UK, back-up capacity will become increasingly redundant in Germany, compared with now. Average utilisation of non-wind and solar capacity will fall from around 51% in 2017 to 27% in 2040.

Battery energy storage and flexible demand can solve short-term volatility issues arising from renewables, such as time-shifting hour-to-hour or even day-to-day. By 2040, Germany will have a significant amount of solar capacity, creating an opportunity for storage that can shift energy from day to night.

However, these technologies will not be well-suited to providing back-up for weeks and months when wind and solar resources are insufficient to meet demand. To meet these longer-term gaps will require dispatchable, and ideally flexible sources.

Still, even at around 60% wind and solar in Germany, there is no need for inter-seasonal storage. Short-term storage and other generation sources provide enough flexibility to balance the system.

In BNEF’s analysis, the UK and German energy systems will share many of the same characteristics. Both will see wind and solar dominate overall generation, which in turn increases system volatility, for instance.

However, there will be more opportunities in Germany for energy shifting over multiple durations. Germany will reach a higher penetration of wind and solar, equivalent to 61% of demand in 2040, versus 50% for the UK, so the effects of a renewables-heavy system will be felt more keenly in Germany, in the form of higher curtailment rates for example.

In Germany solar will dominate renewables generation capacity, while the UK is predicted then to have more wind capacity than solar. So much of Germany’s curtailment happens during concentrated parts of the day in sunnier months from April to September, providing greater opportunities for day-night storage or demand shifting.

 

Solar-plus-storage to dominate flexible capacity in Europe

(Source: Bloomberg New Energy Finance)

Flexible capacity refers to technologies used mainly to meet peak demand, like battery storage, demand response and pumped hydro. BNEF expects flexible capacity to increase threefold to 152GW by 2040. Small-scale batteries will account for most of this growth. By 2040 46GW of flexible capacity in Europe will come from small-scale storage, coupled with small-scale rooftop PV systems.

As Europe’s power systems’ become ‘peakier’ big grid batteries and demand side response will become more prevalent too. To 2040, utility-scale battery capacity will grow by 9GW, while demand side response capacity increases by 31GW. Today Europe has 38GW of other flexible capacity, mainly in the form of pumped-hydro storage, which will grow slightly to just under 50GW by 2040.

 

Energy Storage & Connected Systems is an annual conference and exhibition held in association with the Renewable Energy Association that brings together key industry figures to focus on the future of energy in the UK.