The Power of Transformation

The Power of Transformation: Wind, Sun, and the Economics of Flexible Power Systems

Overview

The International Energy Agency (IEA) has published "The Power of Transformation," a comprehensive study on the integration of variable renewable energy (VRE) technologies like wind and solar photovoltaics (PV) into power systems. This report is part of the third phase of the Grid Integration of Variable Renewables (GIVAR III) project, involving 15 countries across four continents.

Key Findings

1. Economic Significance of VRE Integration

   • The study gauges the economic impact of integrating VRE into power systems.
   • High shares of VRE can be integrated without significant increases in total system costs, provided a system-wide approach is taken.

2. System-Wide Approach

   • A system-wide approach is essential for integrating high shares of VRE.
   • Four flexible resources—generation, grid infrastructure, storage, and demand-side integration—are crucial for achieving cost-effective integration.

3. Technical Performance and Cost-Effectiveness

   • Detailed modeling analyzed the technical performance and cost-effectiveness of the four flexible resources.
   • The report provides an analytical framework for understanding the economics of VRE integration.

Context

• Role of VRE in Energy Transition

  • Wind and solar PV play a growing role in diversifying and de-carbonizing energy supplies.
  • All IEA scenarios foresee a significant increase in VRE generation over the coming decades.

• Challenges and Opportunities

  • Integrating VRE presents both challenges and opportunities.
  • The traditional view of VRE integration needs to shift towards a system-wide approach.

• Cost Variability

  • The cost of integrating VRE can vary depending on the context.
  • In dynamic power systems with growing demand, VRE can be cost-effective.
  • In stable power systems with stagnant demand, rapid VRE deployment can be more costly.

Policy Implications

• System Transformation

  • Achieving a system featuring 45% VRE may incur little additional long-term cost compared to a system with no VRE.
  • Strategies for incumbent producers to adapt to the transformation are needed.
  • Managing the costs of scaling down the old system poses significant challenges.

• Distributional Effects

  • Rapid VRE deployment can lead to winners and losers.
  • Governments must manage the distributional effects, including the retirement of existing infrastructure before its end-of-life.

Conclusion

• The report underscores the potential of VRE to play a central role in a secure and low-carbon energy system.
• Effective policy and collaborative efforts are necessary to manage the transition and mitigate associated costs.

This comprehensive analysis offers valuable insights into the economic and technical challenges and opportunities of integrating VRE into power systems.