Chair of Energy Economics , Prof. Dr. Möst The role of grids and storage for renewable integration www.ee2.biz Dual Plenary II: New designs in electricity markets IAEE Wien - „ HEADING TOWARDS SUSTAINABLE ENERGY SYSTEMS: EVOLUTION OR REVOLUTION ?” 04.09.2017 Prof. Dr. Dominik Möst, TU Dresden
Increasing amount of intermittent renewables Electricity production in Europe • Installed capacity of renewable energy sources (RES) will increase in Europe (and worldwide) • Flexibility need will grow • Several options can provide flexibility: Storage Supply Demand Grid TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 2 Source: Eurostat
Agenda 1 Graphical analysis: optimal capacity and long-term merit order effect 2 Model based analysis: trade-off between grid and storage capacities 3 Market zones, grid extension and the impact on congestion management 4 Some final thoughts TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 4
Hours with surplus renewable feed-in will increase The integration of renewable Exemplary residual load duration curve for Germany energy sources (RES) significantly 80.000 influences the residual load: 60.000 Number of hours with negative residual load rises 40.000 Surplus of RES feed-in increase 20.000 Level of maximal negative MW residual load grows 0 0 487 974 1461 1948 2435 2922 3409 3896 4383 4870 5357 5844 6331 6818 7305 7792 8279 -20.000 What to do with the surplus? -40.000 Store, export or curtail? -60.000 2010 2030 2050 (20%)* (60%)* (75%)* * RES share TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 5
Simple (graphical) capacity model Load duration curve Illustrative model [MW] • Simplified visualisation of necessary capacities in steady- P inst, 1 state P inst 2 Optimal capacity in long-term P inst, 3 equilibrium • Assumption: Time [h] Immediate adaption to optimal Storage plant ? Costs power capacities [€/MW] Technology 1 No congestions in the (Peaker) Technology 2 considered system Technology 3 …. C var3 *t 3 (Base-load) C fix3 C var2 *t 2 C ST C fix2 C var1 *t 1 C fix1 Time [h] t 1 t 2 t 3 8760 h TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 6
System perspective Adaptation of „optimal“ capacity ? Load duration curve Necessary generation portfolio [MW] – what will change? P inst, 1 Reduction of base-load and • mid-load P inst 2 Increase of peak-load • Increase of storage power • P inst, 3 plants Time [h] What to do with the surplus? Storage plant ? Costs Store • [€/MW] Technology 1 Decreases variable production costs (as surplus will probably Technology 2 be „cheap“) Technology 3 C var3 *t 3 Export • C fix3 C var2 *t 2 C ST Demand Side Management • C fix2 (Smart Market) C var1 *t 1 Curtail surplus C fix1 • Time [h] t 1 t 2 t 3 8760 h TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 7
Schematic merit-order effect and impact on price distribution Min. Max. Marginal Demand Demand costs with and without RES Merit-order curve with Price distribution and without renewable feed-in Distribution RES feed-in Load distribution Load Renewable feed-in • Self-marginalisation with high shares of renewables (e.g. 100 GW PV) • Speed of change/RES extension and expectations for subsidies prevent a market equilibrium! => Further incentive schemes for renewables are necessary! TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 8
Impact on the price duration curve The merit-order effect of renewables (long-term effect) Peak price will increase Past (2006 – 2010) Peak load units (gas, oil) Today (2011-2020) Future (2025+) Euro/MWh Base load units (lignite, coal) Current prices (under pressure) • RES-E extension underestimated • Demand overestimated Base load under pressure (up to you have to pay for “withdrawing”) h General (policy) decision: Correct scarcity pricing signals versus a regulated capacity “market” (resulting in a cut -off of extreme price peaks)? TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 9
Agenda 1 Graphical analysis: optimal capacity and long-term merit order effect 2 Model based analysis: trade-off between grid and storage capacities 3 Market zones, grid extension and the impact on congestion management 4 Some final thoughts TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 10
Hours with surplus renewable feed-in will increase The integration of renewable Exemplary residual load duration curve for Germany energy sources (RES) significantly 80.000 influences the residual load: 60.000 Number of hours with negative residual load rises 40.000 Surplus of RES feed-in increase 20.000 Level of maximal negative MW residual load grows 0 0 487 974 1461 1948 2435 2922 3409 3896 4383 4870 5357 5844 6331 6818 7305 7792 8279 -20.000 What to do with the surplus? -40.000 Store, export or curtail? -60.000 2010 2030 2050 (20%)* (60%)* (75%)* * RES share TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 11
Electricity system model ELTRAMOD to analyse the interdependence between storage need, grid extension and renewable curtailment Model purpose • Fundamental system model / bottom-up model • Integration of renewable energy sources (RES) in the European energy system • Flow calculation based on Net Transfer Capacity (NTC) • Trade-off between grid and storage extensions • Combined investment and production planning Main characteristics • Temporal resolution of 8760 hours • Calculation of the cost-minimal generation dispatch and investments in additional transmission lines and storage facilities • Country specific times series of wind and PV feed- in TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 12
Grid and Storage Extensions in Europe till 2050 An application of ELTRAMOD for the Energy System Analysis Agency (www.esa2.eu) RES feed-in obligation RES curtailment Grid extensions (NTC) ≤ 500 MW ≤ 1000 MW ≤ 3000 MW ≤ 5000 MW 1020 ≤ 10000 MW 1168 1168 10976 1020 6711 ≤ 15000 MW 2520 > 15000 MW 4640 Storage extensions MW No storage extensions 11536 RES feed-in obligation: every available unit of RES has to be integrated RES Curtailment: the surplus of RES supply can be curtailed => RES priority feed-in significantly influence the need of further storages and transmission capacities. TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 13
Removing the feed-in obligation and its impact on grid and storage extension feed-in obligation curtailment Non integrated RES surplus supply without 10.2% 11.9% grid and storage extensions Non integrated RES surplus supply with grid 0.9% 3.7% and storage extensions Additional transmission capacities up to 2050 252.2 GW 143 GW (NTC) Additional storage capacities up to 2050 35.7 GW 7.9 GW Mandatory feed-in versus curtailment has a low impact on integrated RES generation => However: significant difference for grid and storage extensions settings Central statement: From the economic point of view it is not optimal to integrate all available RES generation RES should be demanded for system stability and further market integration. => Mid term perspective: grid extension and stronger market integration, then storage… TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 14
Impact of RES-E share and CO 2 -prices on the need of storage capacities in the system Share of RES-E generation • Mid-term (< 40%): Nearly no change in storage demand • Long-term (>60%): Increase of storage demand, but still moderate • Long-long-term (>85-90%) Significant increase of storage demand! Cost of CO 2 • Low CO 2 - price (<15 €/t): Good for storage power plant (cheap base -load) • High CO 2 - prices (>40 €/t): Amount of storage at 50% RES -E at about todays storage level => Storage need is quite sensitive to RES-E share and CO 2 costs, but unfortunately in a contradicting way! TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 15
Economic value of storage (simplified illustration) • Value of storage capacity [€/kW ] (from system perspective) With higher shares of intermittent renewable resources, the value of storage increases • Grid extension as well as demand side management are in competition with storage • Portfolio of RES-E has an impact on storage needs Grid extension E.g. more Offshore => less storage need but larger grid extension need (due to larger transport distances) versus more PV => more storage favourable but less grid extension Share of RES-E increasing 2050 2030 Today Inst. Storage capacity [GW] TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 16
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