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Variable Renewable Energy Requires Flexibility Measures

Pritil Gunjan
Feb 02, 2021

Guidehouse Insights

Decarbonization of the power sector is increasingly supported by legislative pushes and technological advancements in renewables. These variables unlock business opportunities for the energy transition. Sustainability measures are now run in parallel to meeting the growing demand for energy with increased integration of wind and solar PV, also known as variable renewable energy (VRE). Investment in VRE technologies will likely accelerate across the energy ecosystems of mature and emerging economies. They are supported by regulatory mechanisms, feed-in tariffs, renewable portfolio standards, tax rebates, and clean energy auctions.

While some strategies focus on integration of renewable technologies along with energy storage and demand flexibility, others deploy low carbon digitized distributed energy resources (DER) to achieve emissions targets. Deployment of VRE and DER has changed the global fuel mix as costs continue to decline. Digitalization is critical to supporting the flexibility requirements of the energy system. VRE forecasting technologies can provide better foresight to system and grid operators in planning operations and reserves.

New Business Models and Strategies Are Needed to Support VRE

Given the current market conditions, VRE is not immune to challenges, specifically the inherent variability of these resources pose integration challenges for power system operators. While integration challenges are driven by the scale of deployment, regulatory market dynamics and supply-demand economics also pose challenges. Measures to support system flexibility must be built into the adoption of VRE into the energy system.

Players Should Be Flexible

The International Energy Agency defines power system flexibility as “the capability of a power system to maintain continuous service in the face of rapid and large swings in supply or demand, whatever the cause.” Flexibility has always been an important requirement for power systems due to the need to plan for unexpected contingencies such as plant and transmission outages. New market structures that assist with flexibility needs such as frequency stability, adequacy, and system reliability are undergoing exponential transformation while leveraging growing electrification opportunities. This will help develop innovative ways of operating the system (interaction between transmission and distribution grid operators) and leverage new business models (aggregators, energy service companies) incentivizing increased integration of VRE in the energy system. Energy system operators and policymakers need to acknowledge and unlock flexibility strategies along with new business models and market design initiatives to encourage accelerated deployment and grid integration of VRE and DER.