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Renewables drive transformation of power system

The system should be transformed completely if it is going to work, says IEA

Integrating large amounts of variable renewable energy into the energy mix is really about transforming the world’s power systems, the International Energy Agency (IEA) has said. “Integration is not simply about adding wind and solar on top of business as usual. We need to transform the system as a whole to do this cost-effectively,” the agency’s executive director Maria Van der Hoeven said at the launch of the IEA’s latest report.

In The Power of Transformation – Wind, Sun and the Economics of Flexible Power Systems, the agency says that integrating high shares – more than 30% of yearly electricity production - of wind and solar photvoltaics (PV) in power systems can come at little additional cost in the long term. But costs depend on the flexibility of systems and what strategies are taken to develop system flexibility in the long run. Managing this transition will be more difficult for some countries or power systems than others, the study says.

Today, wind and solar PV make up just 3% of world electricity generation, but some countries already feature very high shares. In Italy, Germany, Ireland, Spain, Portugal and Denmark, these renewable energies made up from around 10% to more than 30% of electricity generation in 2012.

Integrating the first 5-10% of variable renewable energy generation poses no technical or economic problems at all within existing systems set up to cope with variable demand. However, going beyond this to a share greater than 30% necessitates transforming the system, says the IEA.

Such a transformation has three main requirements; deploying variable renewables in a system-friendly way using state-of-the art technology, improving day-to-day operations of power systems and markets, as well as investing in additional flexible resources.

In stable systems, such as those in Europe, the existing asset base will help provide sufficient flexibility to increase variable renewable energy further. But, in the absence of demand growth, expanding variable renewable energy in stable systems inevitably comes at the detriment of incumbent generators and puts the system as a whole under economic stress. The transformation challenge in stable systems is twofold; scaling up the new flexible system, while scaling down the inflexible part of the old.

Clearly governments with stable systems face tough policy questions about how to handle the distributional effects, in particular if other power plants need to be retired before the end of their lifetimes and, if so, who will pay for stranded assets.   

Nevertheless, “these surmountable challenges should not let us lose sight of the benefits renewables can bring for energy security and fighting dangerous climate change. If OECD countries want to maintain their position as front runners in this industry, they will need to tackle these questions head-on,” Van der Hoeven says.

By contrast in dynamic power systems – where significant short-term investments are needed to meet expanding power demand or replace old assets – such as India, China, Brazil and other emerging economies, wind and solar PV can be cost-effective solutions to meet incremental demand.

Variable renewable energy grid integration can – and must – be a priority from the onset, Van der Hoeven adds. “Emerging economies really have an opportunity here. They can leap-frog to a 21st-century power system – and they should reap the benefits.”

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