A Solar Future?

Solar deployment will modify (it actually does already!) the way electrical systems operate, and consequently the way the electricity industry is organized. Economically, this is only a matter of time as the solar industry makes fantastic progress on a yearly basis. Future massive deployment will however bring with it a number of issues, both economic and technical.

First, utility-scale systems, as they grow more competitive, will naturally tend to substitute conventional plants, in particular coal power plants. Carbon taxes, when implemented, will accelerate this trend. The wider adoption of rooftop solar systems will also contribute to changing the power system economics by reducing the size of the wholesale market by a similar volume of the production capacity installed. A direct consequence will be the reduction of the market size for conventional generation, hence the restructuring of the sector.

Now, conventional power plants will continue to be required (at least on the short-term) because photovoltaic solar is by nature intermittent, and its output difficult to predict. As supply needs to equal demand at all times, conventional power plants, which only can be regulated, will thus continue to be needed, in particular for “peak load” and system balancing. This also means they will operate less continuously than before; their “load factor” will be reduced. This will affect prices because as long as these units are required, their economic balance must be assured. This means that wholesale prices will need to cover their fixed and variable costs, and provide an adequate level of margin for the operator. A first trend could thus be towards an increased volatility of prices, to better reflect the current cost of producing electricity at different times of the day, when there is an excess or a lack of renewable power on the grid. Then, capacity markets are also likely to develop, to generate fixed revenues to these conventional units in order to secure them on the grid.

Similarly, the higher penetration of intermittent photovoltaic solar will lead to an increase of transmission and distribution systems’ operation costs, which are today borne by the final consumer thru retail electricity prices.

The operator will be forced to increase its “reserve” power in order to cope with the unpredictable and variable renewable production output. A number of innovations and measures should help smooth this effect. Weather forecasting will help increase the predictability of the solar contribution to the overall electricity demand. Grid codes will help enforce a higher level of regulation (voltage and frequency) at the borders of the solar farm. Now, costs should keep rising anyhow.

Then, conventional generation has traditionally been a key contributor to grid stability. With the restructuring of the conventional generation market, less of it will be available at a given point in time on the grid. Consequently, grid stability could be put at risk. This will lead to an extension of grid interconnections (at transmission level) across countries. The objective of those interconnections is indeed to bundle all production capacities together to ensure a higher level of reliability of the grid. These investments will have to be financed thru an increase of retail electricity prices.

The electrical network will also have to be managed differently. Traditionally, it has been designed to distribute energy flow in one direction (particularly at the distribution level). The network was built to accommodate the highest level of constraints, and consumption patterns were predictable. With the emergence of photovoltaic solar, the energy will now flow in all directions, since this type of generation source is generally connected on the distribution system, and not anymore on the transmission system like it used to be the case for conventional generation. This can lead to situations where the existing network is either durably oversized or congested by too much energy flow. Now, the return on investment of network extensions and upgrades could end up being highly questioned. Distribution utilities, operating at the lower end of the network and supplying electricity to small locations throughout the countryside, could indeed face situations where network costs of some regions become economically unbearable. In addition, the network operators’ calculations on failure modes will become more complicated. Renewable energy flows will need to be integrated in the network model. This will lead to a massive increase of the possible failure modes on the network. Automation of the network will thus become paramount, as well as real-time reconfiguration, simulation and modeling solutions. These investments will have to be integrated into the overall system operation costs as well.

Finally, the deployment of rooftop solar systems will reduce the volume of electricity transiting thru the lines, hence the volume of electricity traded on which network and system operation costs are amortized. This will thus lead to a proportional increase of those costs for the final consumer, and this shall contribute to accelerate a further transition towards more competitive solutions such as rooftop solutions, since by nature they do not require any connection to the grid.

In the end, the higher penetration of solar (and wind) in the grid will thus lead to a number of issues, including a restructuring of the current power market, and most likely more variable prices with higher system operation costs included. Since the main issue is the lack of flexibility of solar energy, energy storage is the key element which, provided it would be economically sound to deploy it on a large scale, would help regulate solar contribution to the grid, and therefore reduce if not solve most of the adverse effects. The idea is to store all of what renewable sources can produce and regulate the output outside of the energy storage system according to demand requirements. While technical solutions do exist, they are not yet industrialized at the level to which they could be widely deployed. To date, only pumping stations possess large power storage capacities. These stations use electricity to pump water back up in a dam when there is little electrical consumption on the network, thus recharging the production capacity of the hydroelectric dam, which then can be used when consumption reaches its peak later in the day. Other storage technologies are also being developed. Energy storage can be done using compressed air systems, flywheels, electrochemical batteries (sodium-sulfur, lithium) and, potentially, hydrogen and semiconductors (© OECD/IEA, Storage 2014). All these technologies have different characteristics. A variety of constraints indeed apply to energy storage technologies, such as its overall power capacity, its discharge time duration, or its capacity to quickly react to a sudden increase in demand. The constraints are also very different between a utility-scale system and a home rooftop system. In the end, the advent of one or several industrialized energy storage technology/technologies will help cancel out the intermittence effect of solar energy and provide the necessary flexibility needed by the grid. Whether or not storage solutions will be able to replace completely conventional units for grid stabilization and system balancing remains a question. If they can, the complete transition of electricity production towards renewable energies, and in particular solar energy, would then be feasible.

Photovoltaic solar is thus a technology in development which offers massive opportunities. To date, 135 GW of production capacity has been installed worldwide. According to the International Energy Agency (2014), this volume should reach 1720 GW by 2030 and over 4670 GW by 2050. It would by then reach over 6000 TWh of electricity production, or 16% of global electricity production. This forecast is conservative, considering the massive trend towards solar energy. A more aggressive forecast from Greenpeace (2015) estimates that up to

Shift to renewable saving potential (© OECD/IEA, Explore 2014; © OECD/IEA, Solar 2014)

Fig. 5.18 Shift to renewable saving potential (© OECD/IEA, Explore 2014; © OECD/IEA, Solar 2014)

2800 GW could be installed by 2030, and 6700 GW by 2050. Economically interesting, decisive to other power technologies and environmentally friendly, solar electricity is a disruption to the electricity market which strongly challenges how the industry has operated for the last 70 years.

Regional Perspectives

With such a change of paradigm, the power and heat generation segment would undergo drastic changes and traditional utilities would be deeply transformed. The massive deployment of renewable energies (particularly solar) would solve the major energy waste issue in conventional power generation. The primary fossil energy consumed in 2010 for electricity production was 3600 Mtoe. The theoretical potential for primary energy saving here is thus 3600 Mtoe, through replacement of fossil fuels by renewable energies. This represents 29% of total primary energy demand.

Each geography’s share of the potential engendered by renewable energies depends on the share of fossil fuels in the overall electricity generation mix of each country in that geography. Asia and North America have the highest stakes in terms of energy saving potential (Fig. 5.18).

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