How can we facilitate the energy transition while increasing electricity security? More specifically, how can allow for a faster and smoother deployment of renewables while reducing electricity price fluctuations and minimizing public grid disruptions and congestions? The answer is by increasing power system flexibility. Accordingly, this article will address what power system flexibility is, why it is crucial and how we can enhance it.
- What is power system flexibility?
- How to make power systems more flexible
- Why is power system flexibility important?
- Final remarks
What is power system flexibility?
Homeowners, businesses and public institutions draw electricity from the public grid for a certain price in order to run their daily activities. As consumers, they rely on a degree of electricity security. This term refers to the extent to which a power system (e.g., public grid) is able to meet consumers’ demand with uninterrupted, reliable and cost-efficient supply of electricity. In other words, it involves ensuring that there is enough electricity generation capacity and infrastructure in place to meet existing and upcoming demand. Furthermore, it implies achieving this goal while protecting the power system from disruptions and strong price fluctuations.
What determines the degree of energy security is the interplay of electricity supply and demand and how efficiently the public grid can manage these two market forces. By virtue of this understanding, we can define power system flexibility as the ability of a power system to effectively manage unpredictable and unstable fluctuations in electricity supply and demand over varying time intervals, preventing disruptions and radical increases in costs.
Breaking down this definition, it implies that a power system is able to handle changes in how much electricity consumers need and how much electricity is available, even when these changes happen suddenly and quickly. In other words, flexibility is the ability of power systems to remain stable, reliable and cost efficient.
How to make power systems more flexible
There are several tools and strategies that can be used to increase flexibility. They can be grouped into 4 groups. These include thermal power plants, power grids & interconnections, battery energy storage systems (BESS) and demand response. In the next decades, BESS alone will make up for the greatest growth in power system flexibility.
1. Thermal Power Plants
Thermal power plants quickly adjust the electricity output of steam turbines in response to changes in demand or supply. They do so by adjusting the amount of steam required to turn the turbines. An additional tool is a pumped hydro storage system. This storage pumps the water to a reservoir during periods of low demand. It then releases it through a turbine to generate electricity during periods of peak demand.
Currently, thermal power plants generate most of the flexibility required to maintain the reliability of power systems. The rest has been mainly provided by hydropower. Nevertheless, by 2050, the rising share of renewables will cause thermal power plants’ role in flexibility to decline from around two-thirds today to a third in the Stated Policies Scenario (STEPS) and a quarter in the Announced Pledges Scenario (APS).
2. Power Grids & Interconnections
Power grids and interconnections between different regions or countries can help stabilize fluctuations in electricity demand and supply. This is achieved by connecting generators spread out over a large area. Additionally, grid management allows advanced control and monitoring technologies to optimize power flows and ensure grid stability.
3. Battery Storage
Battery Energy Storage Systems (BESS) will play the most crucial role in power system flexibility in the next decades. In general, BESS involve using batteries or other energy storage technologies to store excess energy during periods of low demand and release it during periods of high demand. This stabilizes electricity prices, avoids electricity shortages and prevents grid congestion, outages and other disruptions. But there are many other advantages that come with BESS, also including the capability to use demand response mechanisms.
4. Demand Response
Demand response is a set of strategies aimed at aligning electricity consumption with available supply. It encourages users to adjust their consumption during periods of peak demand in response to price signals or other incentives. For example, time-of-using charging involves charging customers different rates for energy usage depending on the time of the day. The goal is to incentivize users to shift their electricity consumption to peak-off hours when demand is lower.
Interruptible load programs offer users financial incentives to reduce or suspend their energy usage during peak demand periods. This allows utilities to avoid or mitigate the need for rolling blackouts or other emergency measures. Another strategy is direct load control. Consumers receive signals from utility providers to stop or reduce operations of some equipment during periods of high demand. In some cases, consumers grant utility providers direct control over their equipment in exchange of financial remunerations. Additionally, demand limiting sets a limit on the maximum energy amount a single consumer can use during peak demand periods. Those who exceed the limit are subject to higher energy rates or penalties. Or vice-versa, those who remain below the limit are granted lower rates.
More efficient demand response mechanisms include encouraging households, businesses, public infrastructure and entire communities to install renewable energy sources. Distributed renewables increase users’ independence from the public grid. In return, this relieves pressure on the public grid during peak demand periods, offsetting the risk of congestion and supply disruptions. This can be reinforced by incentivizing the deployment of battery storage. Besides storing excess energy during peak-off hours and distributing it during periods of high demand, battery storage allows for another demand response mechanism. This is peak load shaving. It involves the reduction of electricity usage during periods of peak demand through energy-efficient equipment (e.g., BESS) and energy management systems.
By 2050, demand-side response will contribute roughly 25% of power system flexibility in both advanced economies and emerging markets. However, realizing this potential will require significant investments in digital infrastructure and technologies. Additionally, regulatory frameworks will need to evolve in order to enable suppliers to offer tariffs that reward demand response to end-users. And they will need to allow aggregators and industrial consumers to offer flexibility in electricity, capacity and ancillary service markets.
Why is power system flexibility important?
Flexible power systems are extremely relevant for two reasons. Firstly, they play a key role in securing electricity supply to households, businesses and public infrastructure by counteracting the primary factors that undermine electricity security. Secondly, they facilitate a faster and smoother transition to renewable energy sources. Let’s delve deeper into into each of these reasons.
1. Securing Electricity Supply
There are two main factors that threaten a reliable supply of electricity. They include high energy price volatility and rising electricity demand.
Hedging against Electricity Price Volatility
Electricity prices are subject to continuous fluctuations. The degree of these fluctuations is determined by the interplay of supply and demand, which is strongly influenced by the availability of resources, transmission and distribution costs, market competition, fuel costs, climate conditions, government policies and events in the international socio-political environment.
We can take the recent energy price spike in the EU as an example. The first signs occured in the second half of 2021. During the Covid-19 recovery, the supply chain disruptions triggered by the pandemic could not keep up with the demand that had built-up until then. Simultaneously, extreme climate conditions like summer heat waves further ramped up electricity demand for cooling and increased pressure on electricity generation capacity.
The situation worsened in 2022. The outbrake and persistance of the War in Ukraine caused a surge in fossil fuel prices. As a result, fossil fuel accounted for 90% of the rise in the average electricity costs worldwide, with natural gas accounting for more than 50%. This was mainly due to substantial or even total cuts in Russian gas supplies in many EU countries. Consequently, in Europe, the average wholesale electricity prices in the first half of 2022 became three times higher compared to the previous year. And in the second half, they exceeded the related average between 2019 and 2021.
Relying on more flexible power systems becomes a crucial asset in this scenario. Indeed, by quickly adjusting supply to sudden demand changes, or viceversa, or by storing energy during periods of low demand and releasing it during periods of peak demand, power systems can effectively and efficiently balance supply and demand of electricity. As a result, they shield countries from highly unstable energy prices, including unexpected spikes in electricity costs.
Offsetting the Rise in Electricity Demand
Rising electricity demand threatens electricity security because it poses increasing strain on the power systems. As a consequence, this causes grid congestion and potentially leads to power outages or other disruptions in electricity supply. In other terms, if electricity demand exceeds the capacity of the power grid to supply it, the grid can become unstable and experience voltage fluctuations, frequency variations, and other critical challenges. These problems can lead to equipment failures, outages, and other disruptions that have potentially significant economic and social impact. Additionally, if the power grid becomes overloaded, it might even be more vulnerable to cyber-attacks or other security threats.
Flexibility tools and strategies prevent periods of peak demand, relieving pressure on the public grid and drastically reducing the likelihood of power outages and other disruptions in electricity supply. Recently, the International Energy Agency (2022) reported that by 2050 global electricity demand is going to rise by 80% according to Stated Policies, by 120% according to Announced Pledges and by 150% in the Net Zero Emissions Scenario. Given these estimates, it is extremely important that electricity supply is able to meet the growing demand. This can be accomplished through more intensive investment in power flexibility tools and strategies.
2. Facilitating the Transition to Renewables
The electricity mix is evolving, with renewables becoming the largest source in the world already by 2030 and solar photovoltaic alone by 2050. Concomitantly, the rise of power system flexibility tools, especially battery storage, is correlated to the growing share of solar photovoltaic and wind power. Flexibility is essential for a well-functioning green energy transition. This is because renewables are sustainable but variable sources of energy. Their nature is intermittent as they produce energy at varying intensity levels depending on the time of the day, weather conditions and seasons. This increases the variability of the net load and makes it more challenging to consistently supply enough energy to meet demand.
Flexible power systems address this issue by quickly adjusting to fluctuations in renewable energy supply and demand. Battery storage systems are a promiment example. They store renewable energy produced in excess during periods of low demand and release it during periods of high demand or when the renewable sources are underperforming due to seasonal and weather conditions. As a result the integration of renewables into the public grid is maximixed. This in turn promotes greater use of clean energy and reduces the reliance on fossil fuels.
As a result, renewables like solar photovoltaic and wind bring about exceptional decreases in electricity prices. For example, it is estimated that solar PV additions in Europe in 2022, which amounted to 41.4 GW (47% annual growth), saved €10 billion in gas costs. The REPowerEU plan aims to increase Europe’s use of renewable energy sources to 45% by 2030, up from the previous target of 40%. This would include reaching a 69% share of electricity generation covered by renewables. Only shifting the target from 40% to 45% could save the European energy mix €43 billion. In total, accomplishing this goal would save Europe €200 billion in gas costs between 2025 and 2030. Germany alone would save €49.7 billion, Italy €29.9 billion and the Netherlands €20.2 billion.
If we want to achieve the new 2030 European renewable target and benefit from the advantages of renewable energy while maintaining high electricity security, we must implement fast growth in power system flexibility. Indeed, in a future defined by the rise of clean and sustainable power systems characterized by high shares of variable renewables, insufficient investment in flexibility technology could present a risk to electricity security. For this reason, policies and regulatory frameworks need to evolve by supporting, incentivizing and ensuring deployment of power system flexibility. This evolving technology is essential to enable a successful transition to renewable energy sources and to create more resilient and reliable power grids around the world.
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