Power System Flexibility: the Key to Electricity Security & Energy Transition

How can we facilitate the energy transition while increasing electricity security? In other words, how can we allow 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.

Table of Contents

  1. What is power system flexibility?
  2. How to make power systems more flexible
  3. Why is power system flexibility important?
  4. Final remarks

What is power system flexibility?

Homeowners, businesses and public institutions draw electricity from the public grid for a certain price to run their daily activities. As consumers, they benefit from a certain degree of electricity security. This term refers to the extent to which a power system 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.

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.

In other words, it implies that a power system is able to handle changes in how much electricity consumers demand and how much electricity is available, even when these changes happen suddenly and quickly.

Therefore, 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 to increase flexibility. They can be grouped into 4 categories: 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.

The 4 main sources of Power System Flexibility: Thermal Power Plants, Power Grids & Interconnections, Demand Response, and Battery Storage.

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.

A hydro storage system 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 the role of thermal power plants to decline from around two-thirds today to a third in the Stated Policies Scenario and a quarter in the Announced Pledges Scenario.

2. Power Grids & Interconnections

Power grids and interconnections between different regions or countries help stabilize fluctuations in electricity demand and supply. This is achieved by connecting generators spread out over a large area. Grid management comprised of advanced control and monitoring technologies optimizes power flows and ensures 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 the use of batteries to store energy during periods of low consumption 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, including the ability 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 consumers 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.

Finally, 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.

Sustainable demand response mechanisms

They include encouraging households, businesses, public infrastructure and entire communities to install renewable energy sources. Distributed renewables increase users’ independence from the public network. In return, this relieves pressure on the grid during peak demand periods, offsetting the risk of congestion and supply disruptions. This can be reinforced by incentivizing the deployment of battery storage and energy mangement systems. Through a process known as peak load shaving, these tools reduce electricity usage during periods of peak demand.

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 enable suppliers to offer tariffs that reward demand response to end-users. Also, they will need to allow aggregators and industrial consumers to use battery storage 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.

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. They are determined by the interplay of supply and demand. These forces are 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 build-up demand. At the same time, 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. As a result, 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. Power systems can quickly adjust supply to sudden demand changes, or viceversa. Or they can rely on batteries that store energy during periods of low demand and release it during periods of peak consumption. In this way, power systems effectively and efficiently balance supply and demand of electricity. As a result, they shield countries from unexpected spikes in electricity prices.

Offsetting the Rise in Electricity Demand

Rising electricity demand threatens electricity security because it poses increasing strain on the grid. 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.

How crucial is this aspect? The International Energy Agency (2022) reported that by 2050 global electricity demand is going to rise by 80% in the basic scenario, by 120% according to announced pledges and by 150% in the Net Zero Emissions Scenario.

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 load and makes it more challenging to consistently match supply with 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 consumption or when the renewable sources are underperforming due to seasonal and weather conditions.

As a result, power flexibility tools maximize the integration of renewables into the grid. In return, this promotes greater use of clean energy and reduces the reliance on fossil fuels.

More renewables like solar photovoltaic and wind bring about exceptional decreases in electricity prices. It is estimated that solar PV additions in Europe in 2022, which amounted to 41.4 GW, 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.

Final remarks

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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This is a work derived by time2ENERGY from IEA material and time2ENERGY is solely liable and responsible for this derived work. The derived work is not endorsed by the IEA in any manner.



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