What exactly does a flexible power system mean, and how does Europe go about building one, asks Kelvin Ross

 

Flexibility. It’s been the buzzword in the European power industry for several years now and is being used more and more as a byword for the way forward for the sector. But what exactly do we mean by flexibility? And why is flexibility so important now?

Fabien Roques, senior vice-president of consulting company Compass Lexecon, says: “Our power systems are undergoing a very profound transformation. We’ve got new technology coming in, supported by governments, and we have active consumer participation – the so-called prosumers – reshaping the system.

“This is leading to a true ‘Copernician revolution’. Our power systems, which were built to transport power from large-scale centralized plants to consumers, will need to be redesigned to allow two-way exchanges with energy produced and optimized locally to a large extent.”

And he adds that “we also need the system itself to become a lot more flexible to make sure that it’s balanced at all times. In a nutshell, the growth of renewables means that we need a lot more flexibility in the system to accommodate their intermittency.”

Giancarlo Benelli, senior consultant at Green Engine Consulting, explains that since the 1980s “we’ve seen a 70 per cent increase in electricity demand within the EU. Traditionally this has been matched by fossil fuels, but in recent years renewables have taken on an increasingly important role, although they have always been rather popular in Europe.”

But he stresses the often-quoted truth that “solar and wind are unreliable and patchy, so thermal and hydropower stations need to operate more flexibly to fill in the gaps”.

Philippe Delage, consultant at PhD.Advisory, is keen to point out that flexibility is not a new demand: “Flexibility has always been important. We used to have power generation units set up with specific commitments to deliver an amount of power at a particular place and time. Today, smaller initiatives are re-addressing the equilibrium.”

In addition, he says that the European market “means that if your generation cost is too high, or its quality is insufficient, you will no longer be able to stay in the market. This evolution has made the analysis of flexibility slightly different – and so important.

“Furthermore, if you sell your flexibility, you get paid for ensuring the satisfaction of the end user. Developing flexibility allows power suppliers to arbitrage between, for example, the price of gas, the price of oil and the price of solar energy, the latter of which is mostly free, so far.”

Delage says that “flexibility is generally viewed as a constraint, but it’s also an opportunity. The issue now is, how do we formalize flexibility in order to better serve this market?”

So how is flexibility being delivered in new plants and retrofits? Roques picks up from where Delage left off: “When you come to providing flexibility to a power system, you need to recognize that there are different potential sources of flexibility actually competing against each other.

“First you’ve got embedded flexibility, which can ramp up or down depending on the characteristics. Some of them are more flexible than others. Besides, the demand itself can provide flexibility. So you can have demand response programmes to ensure that you balance the system.”

Electricity demand in the EU has boomed since the 1980s

In addition, he says flexibility can be provided “through new supply or demand solutions. On the supply side, you have flexible open cycle gas-fired turbines or smaller-scale reciprocal engines, etc. On the demand side, aggregation of demand response from industrial suppliers and/or residential users is promising. And we should not forget new transmission lines that can help leverage flexibility across borders. The final thing is storage, either small-scale decentralized or large-scale utility-scale applications.”

Benelli says that efforts have been underway to extend power ramps in existing plants and to innovate more in new power stations. “This includes by reducing the GT minimum load, approaches to starting up more quickly and better utilizing the gas infrastructure.”

The issue now is how do we normalize flexibility, says Phillipe Delage

Credit: GE

Delage adds that new plants and retrofits require similar approaches. “There are two aspects, I think, the first of which is hardware. This is a case of continuous improvement. But it also includes an element of educating the public, as they will need to understand the requirement to eventually move from a 20th century AC distribution system to more efficient DC distribution and storage system. At the end of the day, batteries work with DC, rather than AC.”

Then there’s software. “Digital systems let us see what hardware is and isn’t working and allow us to plan ahead. That’s the very essence of flexibility, is it not?”

As with any fundamental change, the bottom line is price. So what is the cost of flexibility and how is the market going to incentivize it?

Roques believes you can monetize flexibility “through the existing energy market simply by arbitraging between prices at different points in time. If you’ve got a very flexible asset, you can make money. Now, this begs the question as to whether your power market is designed in a way that reflects the tension in the system in real time, because if your power market doesn’t, then you won’t make that much money by arbitraging. So the key here is to make sure that you’ve got proper responsive prices.”

He adds that there are a still number of barriers to truly responsive prices in a number of European markets, “either because they are price-capped or because of interventions by system operators which prevent prices from rising high enough in real time”.

“There is work underway to better balance the market, but we can clearly see that some countries are further ahead than others. For instance, the UK, Ireland and France allow providers to participate in the market directly, whereas in Spain and Italy this level of flexibility isn’t quite there yet.”

Benelli believes the issue of price “is a complex question. Every investment is motivated by its own specific techno-economic analysis – and each is different. You have to consider the type of generation, the age of the plant and the distinction between capital and fuel costs, just as a start.

“It’s much better to think in terms of the impact of a decision on dispatching priorities.”

But Delage says that “we can’t simply identify a single cost of flexibility as it’s not a simple thing you pay for – it is made up of many different things. For instance, the cost of different technologies can be very different. I would prefer to ask: what does flexibility prevent?

“If flexibility means that we are preventing blackouts, then we have to look at the value of this in terms of the consequences of inflexibility. And you will see that if the consequences were, let’s say, to stop an aluminium smelter, so that full production is stopped and you have to rebuild the factory, the consequences might be huge.

“Ultimately, while there is a cost to flexibility, it’s much more of an opportunity and we should think of it that way. The market will cover the cost.” And on incentives, he says: “The market will be flexible anyway. I think that the real question is: how are the operators, the players on the market, let’s say, positioning themselves? And how are they to be regulated to ensure they’re providing adequate power?”

We’ve talked about the potential costs of flexibility – but who should bear them?

Roques is in no doubt that “flexibility should be paid for by the consumer. If they want reliable electricity on demand, they will have to have flexibility in the system. So we need to put in place a market design that will deliver flexibility at least cost for customers. We need to reform the market to provide the right incentives to market participants to deliver flexibility at the lowest possible cost for customers.”

Benelli, too, says that “in the short term, it should be the end customer”. But he adds: “Longer-term, I think new technologies might be able to shift the load seamlessly across the network, providing much better value for customers.”

Delage states that the last 20 years “show us that the market prices these benefits in automatically, as soon as value becomes apparent. Nobody thinks they pay for efficiency, but in fact we all do. The same will apply to flexibility – the market will reward those who can guarantee their supplies under any conditions.

“Where there could be a cost is in ensuring that the electricity produced comes in the right frequency. Ultimately, the end user will pay for that. In a world of microgeneration and microgrids, it would be unfair to charge homeowners to convert their excess solar production to be absorbed by the network.”

With the COP21 Paris agreement still making headlines, how can plants be flexible and still meet tougher emissions standards?

“Of course there are competing demands on thermal plants because, on one side, you want them to be more flexible, but on the other hand this may go against their efficiency and emissions,” says Roques. “So it’s up to operational managers to decide where to draw the line – bearing in mind that they’ll be competing with a range of other options.”

Benelli adds that most power companies “are committed to sustainable objectives so we’re starting on good footing. The top priority should be to direct investments towards research into new, more efficient technologies and better plant designs. We should aim to make units more flexible, responsive, efficient and effective at lower loads.

Renewables have taken on a vital role in the EU

Credit: Gamesa

“And this will only become more important as we replace older plants, with each new facility providing a new opportunity to do better than before.

“We should also incentivize energy recovery within these plants in order to improve consumer approval of the industry.”

Delage believes that being flexible and meeting emissions standards “are two different questions – they’re independent. You can link it, but it’s a link that is really odd today, and for a specific example, I believe it’s not really a strategic issue. It is only strategic for those who want to take advantage of the rules somehow.

“Those who don’t want stringent emissions controls might try to arbitrage the relative vaues of flexibility and lower emissions but that’s really unfair – how is the customer meant to understand that and make an informed decision?”

So what are the biggest challenges of managing and implementing flexibility as part of the system?

Roques thinks that the challenges are different “depending on who you talk to. As a whole, I think the biggest challenge will be to put in place a market and regulatory framework that will remunerate flexibility in a fair way, and put in place a level playing field between different assets.

“If you look at some of these operators, existing units have a big challenge ahead of them to make sure that they upgrade their assets, to be more flexible but at the same time meet emission standards.”

Benelli believes the most important challenges “are technological innovation and the need to provide clear and long-term energy policies that offer choice between the various environmentally-friendly options”, while Delage opts for “new technologies, new ways to operate, new architecture on the grid, new consideration of what is distributed power generation rather than centralized generation”.

“There’s a lot of change. But ultimately it will allow us to build something better. Going even further, we might imagine that there will be no more centralized or decentralized generation – and instead there will exist a kind of cloud in which you produce, consume, and generate your energy and you also bring back the recovery of energy. That’s the long-term potential of the microgrid.”

And finally, Power Engineering International wonders how the industry can overcome the challenges that have been identified?

Roques says: “I think the industry needs to be proactive in checking market rules so that they provide fair remuneration for flexibility. As I said, it is too often the case that flexibility is not valued properly in current markets and it is too often the case that there is not a level playing field between different flexibility sources.

“So I think the industry has a role to play, to talk to policymakers, to talk to regulators, to really shape the rules of this market in the years to come.

“I think there is a big effort needed to make policymakers and regulators understand how flexibility is critical to maintain the stability of the system going forward and that, therefore, it is important to remunerate it in a fair way.”

Benelli believes that it is crucial “to provide a clear and stable energy policy that truly looks to the long term.

“We need to stimulate investment in the sector as a matter of urgency – it needs to be completely restructured through the introduction of novel technologies, allowing a cheaper and cleaner source of power for a new generation of smart cities.”

And Delage simply states: “We have to tune the overall system, so that it will comply with the emissions tender for any kind of situation.”