For a long time, the rap against renewable technologies was that they simply weren’t reliable – that they destabilised existing electricity grids and that they didn’t deliver “firm” (that is, uninterrupted) power. That’s changing. Renewables technologies have made massive inroads over the last decade, driving down costs to the point where wind and solar sources are cheaper than fossil fuel generation in a growing number of markets. Now, where previously electricity systems struggled to manage relatively high penetration of renewable energy, they are adapting to these new sources of generation. At the same time renewable generators are using new technology to begin to offer “firm” power, removing the final obstacle to large-scale operation.
Global climate policy and new emissions standards are driving coal out of many markets as a source of power. In March 2017 it was reported that in the UK coal consumption has fallen from over 200mtonnes a year at its peak in the late 1950s to 18mtonnes last year. Coal may be disappearing as a source of electricity, but its legacy lives on in the electricity systems and grids that were built to take its power.
If renewable energy is to become the main source of power for the 21st century, allowing us to meet the decarbonization targets agreed in Paris, those remaining “system” obstacles must be removed. The good news is that new technology is enabling renewables generators to deliver “firm” power even within the constraints of existing power systems.
The biggest obstacle to global power sector decarbonisation is inflexible electricity systems designed for the coal era. In some markets, system operators have to curtail wind and solar generation as the existing grid cannot ship the electricity to market, or store it for future use. In others – such as Germany – a decision by government to close existing nuclear plant has led to deeply polluting coal power plant remaining on line, despite rapid growth in renewables. Still in others, like the U.K., the government has created a “capacity market” to provide additional reserve generation should there be insufficient renewable power available. What they should be doing is interconnecting their markets to allow supply to flow in both directions, so that surplus British wind can replace German coal, and extra German solar can supplement gas on the UK system. Then both countries could mothball their most polluting coal and diesel plant for good.
But renewables generators are adapting too. The old “take and pay” model – where wind and solar power plant was paid for every unit generated no matter if it was needed — can be replaced by one where renewables generators supply “firm” power on demand. Rapid advances in storage and demand-side management, as well as forecasting and generation technology, are enabling generators to shoulder the responsibility for providing “firm” power even in existing systems built for always-on coal power.
That renewable producers are able to do this may surprise some given the reputation that renewables cannot be a main source of power because of their problem with “intermittency.” That, however, is no longer the case. Let me explain, using Chile as an example.
Chile’s regulator contracts for “firm” power; that is, its auction system awards long-term power contracts that require companies to meet the demand of customers 24 hours a day. Generators are therefore obliged to make up any shortfall in the amount of power that they are contracted to supply by buying power on the spot market, exposing them to considerable price risk.
By working this way, the Chilean system operator avoids having to deal with the peaks and troughs of supply as the amount of renewable energy in the system increases, moving responsibility to the suppliers instead. And yet this hasn’t stopped wind and solar companies from winning the lion’s share of contracts in competitive power auctions. Our company, Mainstream Renewable Power, was recently awarded seven power contracts in the last tender alone, requiring the construction of new wind power plants with a combined capacity of almost 1GW.
So how are we and others able to turn “intermittent” power into “firm” power and provide consumers with the energy they need full-time?
The first factor is innovation. By generating precise wind measurement data for each project, we were able to build an accurate model of how much of the required energy each project would be able to deliver and how much energy each project would have to buy in the spot market. This in turn allowed us to bid at competitive prices in the tender, with the confidence that revenues would cover the cost of building the projects and the trading risk inherent in the contracts. The development of large scale energy storage – whether using batteries, thermal energy, gravity or other technologies — will make projects even more economically attractive in the future.
Also underpinning these competitive prices are technological improvements at the production level. Better sensors and data-driven analytics, cheaper and lighter materials and bigger blades allow cutting edge renewable companies to further reduce the price of constructing new plants.
The second factor is scale. Renewable supply works best when it benefits from geographic diversity. In our case, each of the seven projects has a different wind profile and therefore produces power at different times of the day. This lets us combine output from the different projects to supply the energy required, reduce the time that no power is being generated by the projects, and thus reduce the need to trade in the spot market.
Chile provides just a taste of what could be done in bigger and more diverse markets such as North America or Europe.
The Chilean model is being closely studied by regulators and governments and could provide an obvious solution in places like Germany and the U.K., where dysfunctional markets are stymying renewables growth and leading governments to maintain — or even subsidize –- dirty coal and diesel generation. Increased penetration of renewables can create a virtuous circle that will continue to lower costs to the consumer as the cost of the technology falls further, and create more demand, while also bringing lower production and financing costs thanks to increased scale. The idea of firm renewables is no longer an oxymoron.