Flexibility costs under high variable renewable energy generation: - PowerPoint PPT Presentation

1 Flexibility costs under high variable renewable energy generation: the Chilean case . S. Mocarquer, R. Quinteros, S. Binato, M. V. F. Pereira 2018 IEEE GENERAL MEETING Portland, August 2018

2 Overview • Objectives of the Analysis • Chilean Market Overview • Methodology • Results • Conclusions

3 Objectives • Quantify the effects of massive VRE 1 insertion in the operation of the electric system with focus on ‘Flexibility Costs’ • Provide valuable inputs for the regulatory discussion in Chile • The study was commissioned by the Chilean Generators Association (AG) • Independent analysis based on public information Note: (1) VRE: Variable Renewable Energy (Solar, Wind)

4 Chilean Market Overview Key information 2017 Renewable generation 15% (excluding large hydro) Peak demand 10,363 MW Energy Sales 49% regulated, 51% un-regulated Transmission lines 32,100 km GDP per capita (PPP) US$ 24,085 Wind 5% Wind 6% Solar 5% Biomass 3% Hydro RoR Hydro RoR Solar 8% Biomass 2% 12% 14% Hydro Capacity Hydro Generation Dam 15% Dam 13% 22,343 74,222 Small Coal 21% MW Hydro 3% GWh/y Small Hydro Coal 40% Diesel 1% 2% Diesel 13% Natural Gas 16% Natural Gas 19% Source: Annual Energetic Report CEN, January 2018. Installed Capacity SEN, Anuario CNE 2017. GDP, The World Bank.

Consulting Team • • Consulting firm founded in 2013 by Provider of analytic tools and executives from the electricity sector, consultancy (economic, regulatory in Santiago - Chile, to support and financial studies) in electricity investors and stakeholders in and natural gas since 1987, based in decision-making in the energy sector. Rio de Janeiro – Brazil. • • Wide range of services taking Team of 54 specialists (17 PhDs, 31 advantage of extensive experience MSc) in engineering, optimization, and high degree of specialization; energy, statistics, finance, regulation, – Market and regulation analysis IT and environmental analysis. – Business strategy • In more than 70 countries on all – Due diligence for transactions continents. – Business development www.psr-inc.com www.morayenergy.com

Methodology of the study • The aim was to estimate the flexibility costs associated with different VRE (solar-wind) expansion scenarios System Modeling AC Verification Flexibility costs Flexibility costs Assumptions and identification scenarios definition Generation, reserve Flexibility costs Detailed electric and transmission functions studies expansion Simulation verification Detailed hourly simulation of the with the detailed system operation electrical network Flexibility costs estimation

7 7 Modeling Tools: PSR Core planning system Modeling Tools: PSR Core planning system PSR Cloud PSR Cloud ePSR : Information management environment ePSR : Information management environment HERA HERA OptGen/OptFolio OptGen/OptFolio NetPlan NetPlan Inventory of hydro basins Inventory of hydro basins Integrated generation / Integrated generation / Detailed probabilistic Detailed probabilistic and other renewable and other renewable interconnection / reserve expansion interconnection / reserve expansion transmission and VAr planning transmission and VAr planning resources resources + financial analysis + financial analysis Time Series Lab SDDP/NCP/CORAL OptFlow Time Series Lab SDDP/NCP/CORAL OptFlow Multiscale stochastic Multiscale stochastic Probabilistic hourly simulation of Optimal Power Flow Probabilistic hourly simulation of Optimal Power Flow scenarios (inflow, scenarios (inflow, system operation and linearized active power w/ losses system operation and linearized active power w/ losses renewable, demand) renewable, demand) G&T supply reliability evaluation and full AC model G&T supply reliability evaluation and full AC model

8 Scenario Definition • VRE insertion level was driven by investment costs and demand scenario 81 senarios Scenario coding: D X C Y – Plan with demand scenario X and investment costs Y – X : A (high demand), M (average), B (low) – Y : A (high price); M (average); B (low)

9 Flexibility Wind and Solar Generation [GWh] • Flexibility → ability of the 9000 system to efficiently CAGR 80+%@5 years Solar FV Solar PV 7500 (2012-2017) respond to supply and Wind Eólica 6000 demand imbalances 4500 • Massive insertion of VRE → 3000 greater challenges in system 1500 operation require system 0 flexibility Sources of Flexibility • Generation technologies ← focus of the study • Demand response • Storage technologies • Interconnections

10 Flexibility Cost Components • The following flexibility costs were evaluated: Type of Cost Components Function Direct Start Up Costs Fuel and emission costs 𝑔 #Start Cycles Indirect Start Up Costs Capex and maintenance 𝑔 #Start Cycles Ramp Up/Down Cost Capex and maintenance 𝑔 #Ramp Cycles Efficiency Cost Fuel and emissions 𝑔 𝐸𝑗𝑡𝑞𝑏𝑢𝑑ℎ Opportunity Costs Lost variable margin 𝑔 𝐸𝑗𝑡𝑞𝑏𝑢𝑑ℎ 𝑏𝑜𝑒 𝑇𝑞𝑝𝑢 𝑄𝑠𝑗𝑑𝑓 • Cost functions 1 were applied to output variables obtained from the simulations • Ex-post analysis to assess unrecovered costs under current regulation Note: (1) The functions related to the start up and ramp up/down costs have been estimated using approximations based on international sources (Power Plant Cycling Costs, NREL, 2012)

11 Criteria for operational reserve • Challenge to incorporate VRE effect to current methodology in use in Chile ➢ R = ƒ(D, G, VRE) Implemented Modeling Current Metodology in Chile 𝑺 𝒃𝒐𝒐𝒗𝒃𝒎 = 𝒏𝒋𝒐(𝑫 𝑷𝒒𝒇𝒔 + 𝑮𝒃𝒋𝒎𝒗𝒔𝒇) 𝑺 𝒊 = 𝑬𝒇𝒏𝒃𝒐𝒆 + 𝒏𝒃𝒚(𝑺 𝑯 𝒊 , 𝑺 𝑾𝑺𝑭 𝒊 ) Optimal annual Dynamic probabilistic reserve reserve Demand Demand (forcast and variation (forcast and variation error) error) Generation Generation (grater unit (grater unit contingency) contingency) Non-supply energy VRE reserve (NSE) cost

12 VRE Reserve ( 𝑆 𝑊𝑆𝐹 ) • Required reserve to account for the uncertainty associated with the forecast error of VRE generation from the simulated series: Step 2 Step 3 Step 1 Difference of forecast error Optimal VRE reserve Forecast error by hour and between consecutive calculation for hour h, 𝑡 by series 𝜀 ℎ 𝑡 ∗ hours for each series Δ ℎ 𝑆 𝑊𝑆𝐹 under CVaR criteria. ∗ 𝑆 VRE = 𝜇 × 𝐹 𝑆 + 1 − 𝜇 × 𝐷𝑊𝑏𝑆 90% (𝑆) • With this type of risk criterion, 𝜇 =0.8 represents a reasonable compromise between reliability and cost

13 Wind – Solar Complementarity • The complementarity of the wind and solar generation is captured in the optimized generation expansion considering hourly profiles 100% 80% 60% 40% 20% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Wind Solar

14 Main Results: Generation Expansion • Wind and solar technologies grow between 9.000 and 16.000 MW by 2030 (investment potential between US$ 8.000 and 18.000+ millions) VRE Expansion 2018-2030 (GW) 18 16 14 12 10 8 Solares Solar PV 6 Eólicas Wind 4 2 0 • Reserve expansion is identified in the North of Chile (200 – 1.000 MW)

15 Main Results: Generation by Technology (Median Hydrology - DMCM) • VRE generation share of 42% by 2030 2021 2030 2025 Hydro Hydro Thermal Hydro 29% 34% Thermal Thermal 25% 39% 31% 35% Wind Solar PV Wind 12% Other Other Solar PV Wind 30% Other 11% Renewables Renewables 20% 13% Renewables 5% 4% Solar PV 4% 8% • Including hydro, renewables account for 75% of energy generation by 2030

16 Main Results: Generation by Technology (Dry Hydrology – DMCM) • Thermoelectricity is still relevant by 2030 under dry hydrology (33% share) 2021 2030 2025 Hydro Hydro Hydro 21% 23% 26% Thermal Thermal 33% Thermal 41% Wind 48% Wind 12% Wind 11% 13% Solar PV Solar PV 30% Other Other Other 20% Solar PV Renewables Renewables Renewables 8% 5% 5% 4% • No decommissioning of coal fired power plants was considered

17 Main Results: Transmission Expansion • Relevant capacity expansion is needed at 500 kV level by 500 kV 220 kV Kimal 1.500 MW 2025 500 kV 220 kV Cardones 224 MW 1.500 MW (01/2019) 270 MW (01/2019) 4.900 MW (01/2025) 750 MW (06/2022) • Expansion plan proposed by Polpaico 500 kV 220 kV 4.200 MW 900 MW the Government includes a Charrua 500 kV 220 kV Cautín longer 500 kV HVDC line 2.100 MW P. Montt 2.600 MW (12/2018) 3.750 MW (05/2021) between Kimal and Polpaico 5.350 MW (01/2025) (US$1,8 billion) 500 kV 220 kV 172 MW 580 MW (07/2021)

18 Main Results: Daily Dispatch – 2021 • The reservoirs and thermoelectricity will provide flexibility in an increasing manner – Hydro Dam: Daily storage (solar hours) – Coal: Ramping/minimum operation – CCGT: Cycling Note: Median Hydrology - DMCM

19 Main Results: Daily Dispatch – 2025 • The reservoirs and thermoelectricity will provide flexibility in an increasing manner – Hydro Dam: Daily storage (solar hours) – Coal: Ramping/minimum operation – CCGT: Cycling Note: Median Hydrology - DMCM