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Power System Flexibility Campaign
Paolo Frankl, Head of the Renewable Energy Division, IEA
IEEJ, Tokyo, 11 June 2019
IEA
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System integration: different phases
70%% VRE of annual electricity generation

60%

VRE shares in total electricity generation by region in 2018

50%
40%

30%
20%

10%
0%

Phase 1 - No relevant impact on system

Phase 2 - Minor to moderate impact on system operation

Phase 3 - VRE determines the operation pattern of the system

Phase 4 - VRE makes up almost all generation in some periods

Specific power system regions can be at higher VRE integration phases due to limited interconnection
and VRE penetration. This can require market reforms to meet increased flexibility requirements
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Flexibility is the cornerstone of tomorrow’s power systems
PhasesPhasesof integrationof integration
withwith
variablevariablerenewables
renewables
share,share,
20172017
to 2030
Integrationphase

All sourcesof flexibility
needed6

Targeted
investment inflexibility needed

4

Mobilise existingpower system
flexibility

Denmark

Germany

5United Kingdom

European Union Germany
United States
3
United Kingdom
India
India
China
United2
CanadaStates
CanadaChina

European Union

Denmark

10%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Wind and solar PV share of generation
Very high shares of wind & solar PV require reforms to attract investment at unprecedented level ingrids & interconnections, flexible power plants, affordable storage & demand-side response
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The PSF Campaign NetworkCampaign brings together a broad spectrum of actors and experiences from across the globe
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More than 2 years of continuous work on power plant and system flexibility
CEM 8AdvancedPowerPlant
Flexibility

CEM 9

CEM 10Focus on thermal power plantflexibility for VRE integration
Focus on VRE, grids, demand responseand storage for system flexibility

PowerSystem
Flexibility

Focus on digitalisation, market
design and sector couplingWork on the campaign has been key to elevate innovative technical solutions to high-level policy
discussionsIEA 2019. All rights reserved.

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Power plants remain the largest source of flexibility
Conventional electricity generation in Germany in November 2017
• Clean Energy Ministerial
Campaign,14 partner countries
and 14 industry and NGOpartners

Other80
GW

Advanced Power Flexibility

7060

Pumped storagehydro• Results published at CEM950

Natural Gas• Continued with broader scope:Power System Flexibility

40
Hard coal30
20Lignite

100Nuclear
1591317212630

November 2017

Significant system flexibility lies latent in many power plants; a range of strategies are available tounlock low-cost flexibility, many are non-technical solutions.
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reserved.
Source:Agora(2018b),
Die Energiewende im Stromsektor: Stand der Dinge 20176

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Status of Power System Transformation 2019
Focus on: Power System Flexibility
Co-authored by:

Available at:https://webstore.iea.org/status-of-powersystem-transformation-2019

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Identifying and engaging with the right actor at each level is key
Institutions and actors (“Who”)

Policy, market and regulatoryframeworks (“How”)

Hardware and infrastructure(“What”)

Typical decision makers

Categories of interventions

Asset types

Energy strategies

Energy ministry

Legal frameworks
Policies and programmes
Regulatory frameworks and decisions

Regulatory agency

Power sector planning exercises
Retail electricity pricing

System operator, electricutility, standards body

Power market rules and codes
System operation protocols
Connection codes

The institutional context defines the set of instruments available to boost power system flexibility.
Enabling new services and roles may also require rethinking the institutional framework.
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All power system assets can provide flexibility, including VRE• Appropriate policy, market and regulatory frameworks can enable participation froma broad range of power system assets.
Annual Production Cost Savings (%)- Example: Tampa Electric Company (USA) study on system integration of PV
25%
20%
15%
10%5%0%0%5%
Full Flexibility

10%
15%
Solar Penetration Potential (%)
Downward Dispatch

20%

Curtailable

25%

30%

Must Take

Redefining grid codes, ancillary service prequalification requirements and remuneration schemes are needed totap into the flexibility potential from VRE. This strongly depends on the institutional framework.
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Electricity networks remain a critical enabler of system flexibility• Inter-regional and international coordination can yield significant economic benefits- Example: IEA China Power System Transformation study (NPS scenario, 2035)
Potential for yearly 36 bn USD system cost reduction (9%) with economic dispatch
CO2 emissions

Mt

USD/MWhCosts
45404 500

35304 2502520154 0001050

Existing trade
Fuel cost

Flexible interregional
trade
Other O&M cost

3 750
Carbon cost

Existing trade

Flexible interregional
trade
CO2 emissions

Enhanced trade across regions can bring substantial cost savings and emission reductions by sharing
flexibility resources more widely.
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Batteries are becoming a cost-competitive flexibility provider• Changes to connection codes andmarket rules enable participation byenergy storage resources.
• Regulatory innovation is needed tounlock multiple benefit streams forstorage resources in a system-effectivemanner.
• Example: Hornsdale Power Reserve
participates in regulation, contingency
reserve and energy markets in South
Australia
FCAS: Frequency control ancillary services

Prequalification requirements and the design of flexibility services are key to enable battery storage inflexibility services. Benefit stacking can increase financial viability but requires further regulatory review.
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Distributed energy resources offer significant flexibility potential• Realising benefits from distributed energy
resources depends on a variety of market rules
and regulations that enable their participation• Allowing the aggregation of loads is a typicalmeasure, allowing distributed energy resource
access to ancillary services- Example: Fortum Spring Virtual Battery in Finland,aggregating loads of electric water heaters

Allowing the aggregation of loads to meet market entry requirements, defining the role of an independent aggregators,
and clarifying balancing responsibilities are key measures for DER contribution to system flexibility
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Sector Coupling addresses wider energy system decarbonisation• Sector coupling efforts have the potential
to enroll new flexible loads at scale toenhance power system flexibility.
• As all energy sectors are impacted there
is a need for coordination of economic
policies beyond the power system.
• Interlinkage of taxes and tariffs between
various sectors of electricity, fuels, gas
and bioenergy should not become
barriers for wider system decarbonization
A new Clean Energy Ministerial horizontal accelerator focused on sector coupling will be considered in2019 to broaden understanding and share experiences of this trend.
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Conclusions and the way forward• Policy maker engagement with actors across the power system is a priority to unlock
latent flexibility potential and de-risk investments.
• Regulatory innovation is essential to integrate new system resources for flexibility
such as VRE, grids, storage and DER.
• Market reforms to provide clear price signals and new revenue streams are key toensure flexible operation of existing assets and investment in flexible resources.
• In regulated contexts, regulatory innovations are key to recognise the value of flexible
operations and new system resources as alternatives to conventional investments.
• The PSF campaign will push ahead in three areas of significant opportunity:
Digitalisation - Market design – Sector coupling
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