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The role of grids and storage for renewable integration www.ee2.biz - - PowerPoint PPT Presentation

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Chair of Energy Economics , Prof. Dr. Mst 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

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SLIDE 1

Chair of Energy Economics, Prof. Dr. Möst

www.ee2.biz

The role of grids and storage for renewable integration

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
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SLIDE 2

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 2

Increasing amount of intermittent renewables

Storage Grid Demand Supply

  • Installed capacity of renewable energy

sources (RES) will increase in Europe (and worldwide)

  • Flexibility need will grow
  • Several options can provide flexibility:

Electricity production in Europe

Source: Eurostat

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SLIDE 3

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 4

Some final thoughts 4 Market zones, grid extension and the impact on congestion management 3 Model based analysis: trade-off between grid and storage capacities 2 Graphical analysis: optimal capacity and long-term merit order effect 1

Agenda

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SLIDE 4

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 5

The integration of renewable energy sources (RES) significantly influences the residual load:

  • Number of hours with negative

residual load rises

  • Surplus of RES feed-in increase
  • Level of maximal negative

residual load grows What to do with the surplus?

  • Store, export or curtail?

Hours with surplus renewable feed-in will increase

  • 60.000
  • 40.000
  • 20.000

20.000 40.000 60.000 80.000 487 974 1461 1948 2435 2922 3409 3896 4383 4870 5357 5844 6331 6818 7305 7792 8279 MW 2010 2030 2050

Exemplary residual load duration curve for Germany

(20%)* (60%)* (75%)* * RES share

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SLIDE 5

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 6

Simple (graphical) capacity model

Technology 1 (Peaker) Technology 2 Technology 3 (Base-load)

Time [h]

Costs [€/MW] P inst, 3 P inst 2 Load duration curve [MW] Time [h] P inst, 1

t1 t2 t3

Cvar1*t1 Cvar2*t2 Cvar3*t3 Cfix1 Cfix2 Cfix3

Illustrative model

  • Simplified visualisation of

necessary capacities in steady- state Optimal capacity in long-term equilibrium

  • Assumption:

 Immediate adaption to optimal power capacities  No congestions in the considered system  ….

8760 h

Storage plant ? CST

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SLIDE 6

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 7

System perspective Adaptation of „optimal“ capacity?

Technology 1 Technology 2 Technology 3

Time [h]

Costs [€/MW] P inst, 3 P inst 2 Load duration curve [MW] Time [h] P inst, 1

t1 t2 t3

Cvar1*t1 Cvar2*t2 Cvar3*t3 Cfix1 Cfix2 Cfix3

Necessary generation portfolio – what will change?

  • Reduction of base-load and

mid-load

  • Increase of peak-load
  • Increase of storage power

plants What to do with the surplus?

  • Store

 Decreases variable production costs (as surplus will probably be „cheap“)

  • Export
  • Demand Side Management

(Smart Market)

  • Curtail surplus

8760 h

Storage plant ? CST

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SLIDE 7

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 8

Load Marginal costs

Renewable feed-in

Schematic merit-order effect and impact on price distribution

Min. Demand Max. Demand Price distribution with and without RES Load distribution

Merit-order curve with and without renewable feed-in

Distribution RES 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!

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SLIDE 8

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 9

General (policy) decision: Correct scarcity pricing signals versus a regulated capacity “market” (resulting in a cut-off of extreme price peaks)? Base load units (lignite, coal)

Impact on the price duration curve The merit-order effect of renewables (long-term effect)

Euro/MWh h Peak load units (gas, oil) Peak price will increase Base load under pressure

(up to you have to pay for “withdrawing”)

Current prices (under pressure)

  • RES-E extension underestimated
  • Demand overestimated

Past (2006 – 2010) Today (2011-2020) Future (2025+)

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SLIDE 9

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 10

Some final thoughts 4 Market zones, grid extension and the impact on congestion management 3 Model based analysis: trade-off between grid and storage capacities 2 Graphical analysis: optimal capacity and long-term merit order effect 1

Agenda

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SLIDE 10

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 11

The integration of renewable energy sources (RES) significantly influences the residual load:

  • Number of hours with negative

residual load rises

  • Surplus of RES feed-in increase
  • Level of maximal negative

residual load grows What to do with the surplus?

  • Store, export or curtail?

Hours with surplus renewable feed-in will increase

  • 60.000
  • 40.000
  • 20.000

20.000 40.000 60.000 80.000 487 974 1461 1948 2435 2922 3409 3896 4383 4870 5357 5844 6331 6818 7305 7792 8279 MW 2010 2030 2050

Exemplary residual load duration curve for Germany

(20%)* (60%)* (75%)* * RES share

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SLIDE 11

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 12

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
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SLIDE 12

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 13

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: 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.

1168 10976 2520 1020 1020 4640 11536

MW

Storage extensions No storage extensions Grid extensions (NTC) ≤ 500 MW ≤ 1000 MW ≤ 3000 MW ≤ 5000 MW ≤ 10000 MW ≤ 15000 MW > 15000 MW

6711 1168

RES feed-in obligation RES curtailment

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SLIDE 13

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 14

Removing the feed-in obligation and its impact on grid and storage extension

  • 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… feed-in obligation curtailment Non integrated RES surplus supply without grid and storage extensions 10.2% 11.9% Non integrated RES surplus supply with grid and storage extensions 0.9% 3.7% Additional transmission capacities up to 2050 (NTC) 252.2 GW 143 GW Additional storage capacities up to 2050 35.7 GW 7.9 GW

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SLIDE 14

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 15

Impact of RES-E share and CO2-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 CO2

  • Low CO2-price (<15 €/t): Good for storage power plant (cheap base-load)
  • High CO2-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 CO2 costs, but unfortunately in a contradicting way!

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SLIDE 15

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 16

Economic value of storage

(simplified illustration)

  • 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

 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

Value of storage capacity [€/kW ]

(from system perspective)

  • Inst. Storage capacity [GW]

Today 2030 2050 Share of RES-E increasing Grid extension

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SLIDE 16

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 17

Large differences in profitability of large- and small-scale storage due to regulation

Large-scale storage Decentralized PV storage Large-scale storage investment hardly profitable due to small spreads Domestic PV storage profitable dependent

  • n the regulatory environment

20 40 60 80 100 120 2010 2014 2012 2016 2002 2004 2006 2008 Average spot price [EUR\MWh]

  • Avg. 1000h high price
  • Avg. 1000h low price
  • Diminishing spreads compromise profitability
  • f storage and do not justify new investment

Other levies 300 EUR/MWh 6.7 Grid charge 8.1 6.4 Taxes EEG levy 2.6 6.9 Generation & selling

  • Large-scale storage has

to earn money on market spreads

  • Self-consumption from

decentralized PV allows to save on grid charge, levies and taxes

  • >40% of new PV

installations <10 kW contained battery storage in 2015 (only 14% in 2014)

Source: EPEX Spot, BNetzA: Monitoring Report 2016, RWTH Aachen: Wissenschaftliches Mess- und Evaluierungsprogramm Solarstromspeicher 2016

=> Decentral storage options have about 5 times higher incentives in GE but strongly dependent on regulation (grid fees, feed-in tariff, market rules, …) decentral option: + higher willingness to pay will lead to market uptake …

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SLIDE 17

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 18

Maximise „self-consumption“ and autarky from April to October…

Cycle stability is (still)

  • f crucial importance!

Assumption:

  • 1000 - 2500 cycles

=> e.g. 10 a * 250

  • 150 €/kWh

(before 2020) => 6 - 15 Ct/kWh (+ battery management and installation) + approx. 8 Ct/kW PV generation << 30 Ct/kWh el. supply

Source: B. Nykvist, M. Nilsson: Rapidly Falling costs of battery packs for electric vehicles, Nature Climate Change

=> Mid-term perspective: decentralised storage systems will be economically very attractive under current tariff structure Learning curve Lithium-ion batteries

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SLIDE 18

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 19

Some final thoughts 4 Market zones, grid extension and the impact on congestion management 3 Model based analysis: trade-off between grid and storage capacities 2 Graphical analysis: optimal capacity and long-term merit order effect 1

Agenda

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SLIDE 19

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 20

Trade-off between grid extension, congestion management and market splitting

Own calculations show that NEP2025 seems to be a reasonable degree of grid extension

  • interested in details? => see presentation of Hinz, Wednesday in session 7B!

Total cost Degree of grid extension Common market zone Market zone split

NEP 2025

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SLIDE 20

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 21

Additional transport requirement necessitates grid extensions and leads to cost increase

2014 2024

TransnetBW Amprion Tennet 50Hertz

3.2 6.4

Source: NEP2030

  • bn. EUR

Ø 7.3% +4.8% +8.2% +7.9% +8.1%

Transport requirement Grid extensions Cost increase

Source: Own calculations based on NEP2024 Source: Consentec (2016), Netzstresstest

  • Distribution of RES causes
  • add. transport require-

ment from North to South

  • Grid extension requirement

quantified and concretized by TSOs

  • 100% increase in

transmission grid cost within ten years

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SLIDE 21

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 22

Omission of necessary investments causes high congestion management cost

600 5 years delay 2,400 NEP Germany International

  • Strong increase in redispatch and curtailment cost due to
  • Horizontal congestions in the transmission grid (North  South)
  • Vertical congestions in the distribution grid

Historic congestion management cost Projection 2025

Conegstion management cost [mio. EUR]

  • 5 years delay in grid extension cau-

ses additional cost of 1.8 bn. EUR

  • Respective invest delta: 10 bn. EUR

(700 mio. EUR annual cost)

Source: BNetzA Monitoringreports, own calculations based on ELMOD grid model

5 year delay in grid extension, only 1 HVDC link Grid extensions according to NEP ~700 mio Exten- sion cost delta

198 159 2013 2015 269 750 2014 2012 45 2011 2008 164 32 30 2009 2007 58 2010

Redispatch & Countertrading Curtailment

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SLIDE 22

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 23

2 GW

  • 7 TWh/a

4 GW

  • 14 TWh/a

2 GW

  • 7 TWh/a

2 GW

  • 7 TWh/a

12 GW

  • 45 TWh/a

18 GW

  • 64 TWh/a

13 GW

  • 47 TWh/a

Assumption: medium utilisation of 40% of each line

Necessary grid extension based on NEP For the year 2025 Estimated grid extension for the year 2050

Long-term: NEP 2025 is not the end, but the beginning of further infrastructure investments

Source: IEEH, TU Dresden => But grid extension strongly dependent on assumptions concerning renewable extension

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SLIDE 23

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 25

Two price zones in Germany? Model-based analysis of long-term impact

Analysis with a fundamental model within Avers-project

  • 10
  • 5

5 10 15 20 25 2015 2020 2025 2030 2035 Preisdifferenz in EUR/MWh SPLIT-DEN SPLIT-DES REF-DEN/DES

Development of price difference => Prices converge due to optimal planning

Explanation DEN … Germany North, DES … Germany South SPLIT-DEN/DES … two market zones DEN/DES

0.6 0.8 1.0 1.2 1.4 2015 2020 2025 2030 2035 Versorgungssicherheitsniveau REF-DEN REF-DES SPLIT-DEN SPLIT-DES

Price difference in €/MWH Level of adequacy

Development of level of adequacy => Optimal capacity installations increase regional level of adequacy

Source: Avers-project: Hladik, D., Fraunholz, C., Kunze, R.: Zwei Preiszonen für Deutschland, Optimierung in der Energiewirtschaft

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SLIDE 24

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 26

Some final thoughts 4 Market zones, grid extension and the impact on congestion management 3 Model based analysis: trade-off between grid and storage capacities 2 Graphical analysis: optimal capacity and long-term merit order effect 1

Agenda

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SLIDE 25

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 27

Some final thoughts and conclusions

Are there any principles that exist for a long time and do we ignore them because we are used to them?

  • Electricity prices

 Markets: Supply and demand are well functioning („technically“)  But: speed of change and expectations for subsidies prevent a market equilibrium

  • Complexity of political measures

 One policy mechanism (market engagement) pulls next to itself  Objectives are often conflicting (fragmentary, incomprehensible) and system perspective is missing

  • Market created with liberalization and systematically hollowed out ...

 When do grid operators build power plants?  Tendency that state defines „right“ technologies

 Renewable integration necessitates broad portfolio of technologies and correct price signals!  Power grids play an important role for renewable integration!  Interdependencies in the system have to be considered! => How can Europe benefit (more) from the „Energiewende“?

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SLIDE 26

Fakultät für Wirtschaftswissenschaften, Lehrstuhl für Energiewirtschaft, Prof. Dr. Möst

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SLIDE 27

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 29

Grid extension is necessary …

  • „Early“ Coal-phase-out

until 2030 is possible, but:

 not with the expected grid extensions of NEP! => New/additional power lines are necessary!  Additional: back-up capacities at some locations necessary! => Current electricity prices: Who are the investors (without subsidies)?

Necessary investments in new lines (in km) for different lignite-phase-out scenarios

REF … no lignite-phase-out LPO-DE … lign.-phase-out GE LPO-East … lign.-phase out in East-GE LPO-West … in West-GE LPO-Gas … substitution of lignite by gas power plants

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SLIDE 28

TU Dresden, Chair of Energy Economics, Prof. Dr. Möst 30