Mind the Storage Gap: How Much Flexibility Do We Need for a High-Renewables Grid?

Imagine for a moment that we have built enough wind and solar power plants to supply 100 percent of the electricity a region like California or Germany consumes in a year. Sure, the wind and sun aren’t always available, so this system would need flexible resources to fill in the gaps. But with continuing rapid cost declines of wind, solar and batteries, it’s possible that very ambitious renewable energy targets can be met at costs competitive with fossil fuels.

Every region has a different climate and demand profile, but with the right mix of wind and solar, up to 80 percent of the variable renewable power produced could be used in the same hour, without accounting for transmission interconnections. Still, a reliable grid needs fast-responding flexible resources to satisfy the remaining 20 percent of demand. But what will that flexibility cost?

The answer is surprising: By 2030, an 80 percent renewable energy system including needed flexibility could cost roughly the same as one relying solely on natural gas. As Climate Policy Initiative (CPI) demonstrated in our recent report, Flexibility: The Path to Low-Carbon, Low-Cost Electricity Grids, if renewable generation and battery storage prices continue to fall in line with forecasts, meeting demand in each hour of a year with 80 percent of electricity coming from wind and solar could cost as little as $70 per megawatt-hour — even when accounting for required short-term reserves, flexibility and backup generation. Finding cheap, reliable and carbon-free ways to shift energy for long periods emerges as the key decarbonization challenge.

Of course, this analysis makes some simplifying assumptions. It represents the new-build cost of generation and flexibility to meet demand in every hour using historical weather profiles from Germany, without factoring in transmission connectivity or existing baseload power plant constraints. But it also leaves out the significant potential for cheaper flexibility from regional interconnections, existing hydroelectricity and the demand side.

CPI’s analysis helps us understand what kinds of flexibility we will need and what they will cost. The promise of a low-cost grid based on wind and solar is so compelling, it’s worth digging into what we’d need to do to realize this vision.

What is flexibility, anyway?

A power system has a wide variety of flexibility needs with time scales ranging from seconds to seasons, and a range of different technology options can be used to meet those needs, depending on the time scale.

Fast-responding resources are needed to keep the grid in balance and compensate for uncertain renewables and demand forecasts on very short time frames from seconds to minutes. These needs should grow only modestly as shares of renewables climb to high levels, and they could be accommodated cheaply using existing hydro generation (where it exists), fast-responding demand response, cheap batteries or even smart solar and wind power plants.

Solar and wind output can also change rapidly on a predictable, hourly basis, requiring flexible resources that can quickly pick up the slack. One feature of California’s now-infamous “duck curve” is the need for fast-ramping resources to meet the evening decline in solar production. California has devised innovative market mechanisms to ensure flexible gas and hydro generators are available to meet these ramping needs.

On a daily basis, the profile of renewables production doesn’t neatly match demand, requiring resources that can store or shift energy, or otherwise fill in the gaps across the day. Today, daily imbalances are met primarily by dispatching fossil-fuel-fired power plants. But a number of solutions are gaining momentum, such as automatically shifting when consumers use energy and building large batteries.

At even longer time frames, multi-day and seasonal mismatches can exist between when renewable energy is produced and consumed. But the promising solutions for daily storage may not solve seasonal storage needs. In fact, using lithium-ion batteries for seasonal storage, cycling once per year, would cost tens of thousands of dollars for each megawatt-hour shifted.

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