What has the “renewables (RES) sector” changed over the last 10 years?

• The early investment incentives, decisions and politically ambitions promoted in several countries in EU and beyond to achieve an “energy transition” made the concept of RES evolve. Why?
• In 2018 and also the years to come, RES will no doubt increase their penetration into the electric systems aiming at the achieving global climate goals defined by COP21/COP 22 – limiting global temperature increase to 1.5 °C. RES has already increased their share from 26% of total power capacity in 2005 to 47% in 2017.
• In terms of cost, the average cost of on-shore wind decreased by 35% and the of PV by almost 80% between 2008 and 2015.
• This increase in the penetration trend is not only due to the environmental emission constraints but also due to the fact that at least some RE sources are already cheaper than conventional energy.
• By 2017, the total RES capacity installed in the EU was 455 GW, 169 GW was in wind and 107 GW in PV, both accounting for 29.5% of the EU power mix.

• Wind power was the energy technology with the highest capacity installations in 2017. With 15.6 GW, it accounted for 55.2% of all new installations.
• Solar PV came second with 6 GW, accounting for 21.5%, overtaking the conventional power sources, such as fuel oil and coal. (Source: 2017 European Statistics, WindEurope)
• But other renewable energy recourses, such as biomass, geothermal, solar thermal electricity, etc., are technologically able to reliably integrate such and even more volumes of intermittent generation sources remained much less deployed in Europe, only accounted for X% in Europe.
• Somehow these manageable renewable energy recourses seem to be forgotten in today’s mix of energy use.
• The renewable energy sector should today no longer be defined generically only based on the CO2-free generation features, but according to:
  • The intermittence vs. manageability, with a massive impact on the value of the kWh price in a power system
  • Level of deployment, with a massive impact on investment cost levels, frequently wrongly used as a dominant investment criterion
• The result is a massively unbalanced ratio between intermittent and manageable renewable generation sources in Europe which will lead to unsustainable electrical systems in the Member States especially when conventional plants will be decommissioned and their capacity need to be replaced.

Why is energy transition an irreversible process in most countries?

• The COP21 confirmed the imperative commitment of the international community to decarbonize the planet. Much in line with this success, the Juncker Commission had set Europe becoming Nr1 in RES as the highest priority target.
• Wind and PV are currently the fastest-growing sources of electricity globally. (See 2.1)
• As far as the EU power system is concerned, the energy transition to RES is today consistently seen an irreversible process.
• It evolved from a timid policy-driven process to a mainstream investment that will have substantial impact on the economy of the next decades. Europe is certainly going for green growth.
• However, the proper development of the “RES sector” that started in the late 90ies as a “niche market” that did not impact the utilities. The power market is today the most important investment driver for new generation in Europe.
• But the RES sector, triggered market forces and some trade policies agreements, has strongly evolved. Beyond the common denominator (the fact of not producing CO2 emissions), the sector delivers 2 types of power generation:
• Non-manageable sources with a grid integration problem and market sustainability issues;
• manageable sources as most sustainable solution to grid integration and decarbonisation;
• Here is the essential point why STE is neither "obsolete" as technology nor “irrelevant” as a market. It is just a matter of time to prepare with STE the moment when EU will need flexible green generation to further progress towards decarbonisation)

What would happen if the intermittent renewable energy became a main source of power generation?

• The success of wind and PV is driving change in power systems not just in Europe but also around the globe. Electricity generation from both technologies is constrained by the varying availability of wind and sunshine, which makes the output of intermittent RE sources fluctuate over time. This poses a challenge to the power system. Power system operation and planning are needed to be upgraded and adapted to accommodate more intermittent on the grid.
• Even improved operations and system-friendly intermittent deployment practices might be insufficient to manage high shares of VRE in the long term. Thus, additional investment in flexible resources becomes necessary.
• Also, when the share of intermittent generation increases, the variability of intermittent generation and other adverse effects can lead to a drop in SV.

What would be the consequences of maintaining an imbalance between manageable and intermittent generation?

• In a future grid with a high percentage of intermittent, fluctuating generation, like wind and PV, controllable and dispatchable generation will have to play a much larger role in filling the gaps in the system, according to a recent study “Evaluating the value of concentrated solar power in electricity systems with fluctuating energy sources” performed by Institute for Power Electronics and Electrical Drives, RWTH Aachen University based on a new computational tool[1].
• The increasing share of variable renewable generation is fostering policy makers and regulators to reconsider power market designs and system planning and operation.
• Depending on local circumstances, variability of renewable energy can raise some challenges for power system operations, especially at higher market shares.
• Integrating distributed and VRE into the power sector requires efforts at both the system and market level.
• System considerations for increased renewable power deployment relate to concerns with power system adequacy and operation, power production, demand scheduling and balancing within the physical constraints of the interconnected power grid.
• Market considerations relate to the effects of varying degrees of renewable capacity deployment on power market design and operation, and to the implications for cost recovery of other critical system components (e.g. distribution networks and reserve generating capacity).
• In Europe: This leads often to a restriction or even curtailment of the operation of renewable plants and to an increase of the costs of ancillary services for balancing the system, as for instance, in order to have sufficient spinning and short-term power reserve available in case of a rapid drop in the supply from intermittent renewable sources. Business cases for intermittent generation technologies will become uncertain and unviable from a certain penetration share.
• In other words, the more installed capacity in intermittent generation, the higher the probability to face such an imbalance between supply and demand.
• In emerging economies: there is often a need to increase generation capacities in all timeframes at a high rate – doubling in a decade – and especially for covering the afternoon-evening peak; therefore, the penetration of intermittent generation in such systems needs to be backed by fossil-fuel plants – with a large share of combined cycles.

This has three concomitant effects:

• a two-fold investment for adding additional capacity (RES sources plus back-up capacity);
• a considerable restriction of operation time of added fossil-fuelled capacities which in turn also substantially increases their operating costs;
• a barrier to achieving a truly carbon-free generation system.
• In short, policy makers, regulators and power system operators around the world must adjust and ensure no interruption to the continuous transition to renewable systems while promoting the growth in variable renewable power.
• It is essential to pursue an efficient combination of measures as local conditions dictate.

[1] Source: http://aip.scitation.org/doi/abs/10.1063/1.4949251

Why is the System Value not considered in energy policy frameworks generally?

• It is because mechanisms are needed to provide sufficient long-term revenue certainty to investors calculating the precise system value can be challenging and the current and future SV will differ.
• More generally, the reasons for not considering the system value[1] in new policy frameworks is explained by the International Energy Agency IEA^[2] as follows:
• “Reflecting “System Value” (SV) in policy frameworks requires striking a delicate balance.
  • On the one hand, policy makers should seek to guide investment towards the technology with the highest SV compared to its generation costs.
  • On the other hand, calculating the precise SV can be challenging and, most importantly, current and future SV will differ.
  • In practice, exposure to short-term market prices can be an effective way to signal the SV of different technologies to investors. However, the current SV of a technology can be a poor reflection of its long-term value. This is due to transitional effects that can be observed in a number of countries where VRE has reached high shares.
  • For example, in European electricity markets the combined effect of renewable energy deployment, low CO2 prices, low coal prices and negative/sluggish demand growth (slow economic growth, energy efficiency improvements) are leading to low wholesale market prices.
  • In turn, these low prices mean that any new type of generation will only bring limited cost savings and will thus have a low short-term SV.
  • Even where electricity demand is growing more rapidly, investments based purely on expected short-term wholesale power prices face multiple challenges.
• Because wind and solar power are very capital intensive, such challenges will directly drive up the cost of their deployment, possibly widening the gap between SV and generation costs. In addition, current market price signals may be a poor indicator of SV in the longer term.
• Consequently, mechanisms are needed to provide sufficient long-term revenue certainty to investors.
• At the same time, such mechanisms need to be designed in a way that accounts for the difference in SV between generation technologies.
• A number of strategies have emerged to achieve this. Two relevant examples are market premium systems, which reward VRE generators that generate higher-than-average value electricity, and advanced auction systems, such as the model recently introduced in Mexico, which selects projects based on their value to the system rather than simply on generation costs.
• As next-generation wind and solar power grow in the energy mix, a focus on their generation costs alone falls short of what is needed.
• Policy and market frameworks must seek to maximise the net benefit of wind and solar power to the overall power system. A more expensive project may be preferable if it provides a higher value to the system.
• This calls for a shift in policy focus: from generation costs to SV. Next-generation wind and solar power calls for next-generation policies.”

[1] System value (SV) is defined as the net benefit arising from the addition of a given power generation technology, a look beyond costs/LCOE.

[2]  http://www.iea.org/publications/freepublications/publication/Next_Generation_Windand_Solar_PowerFrom_Cost_to_ValueFull_Report.pdf

What are the verified technical and economic impacts in countries that launched a STE deployment program?

• The massive increase of the share of intermittent electricity generation is due to the fact that in most of the power systems, additional generation is auctioned so as to secure a long-term power purchase agreement (PPA). But in countries without auction practice in such cases, generation turns to be remunerated based on the marginal cost of the last offer matching the actual demand. In turn, this results from the fact that:
• there is no repercussion on the generation units of the costs triggered by the necessary adjustments of system services to the needs (for balancing);
• for the purposes of the “energy transition”, a reasonable priority of dispatch was given to renewable energies.

Spain: http://www.solarpaces.org/wp-content/uploads/protermo_solar_21x21_inglesc.pdf