China Power System Transformation |
Power system transformation and flexibility |
economic incentives and other constructs that entities experience when utilising those technical solutions (the policy, regulatory and market frameworks, or the “how”)
roles and responsibilities that various entities have in providing flexibility (the institutional, or the “who”).
For example, in order to make the demand side more flexible, one may need special devices for the remote control of loads (hardware and infrastructure); electricity prices may need to vary across time in a market design that supports flexibility and gives the right economic incentives (policy, regulatory and market frameworks); and possibly a new player, such as a flexibility aggregator, needs to be allowed to participate (institutional). All three aspects must work in concert to support system flexibility (Figure 13). Addressing each of these in more detail:
Hardware and infrastructure: The “what” of system flexibility. Hardware and infrastructure encompass the technical resources that provide physical power system flexibility – both the physical equipment itself and the flexibility services the equipment provides.
Policy, regulatory and market frameworks: The “how” of system flexibility. Policy, regulatory and market frameworks provide signals that power system stakeholders experience to influence investment in, and operation of, hardware and infrastructure to achieve flexibility targets. These frameworks influence the deployment and operation of system flexibility hardware and infrastructure.
Institutional: The “who” of system flexibility. The institutional layer encompasses the roles and responsibilities of various actors and stakeholders that can participate in providing system flexibility, relating to power system operation and planning. Important relevant actors include policy makers, utilities, system operators, power plant operators, demandside resources, regulatory bodies and investors in the energy sector. The institutional aspect is also closely linked to the rules that govern actors and stakeholders.
Figure 13. Different layers of system flexibility
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Institutional |
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Roles and responsibilities |
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Policy, regulatory and market |
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Technical rules and economic incentives |
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(“What”)
Grid infrastructure
Source: IEA (2018a), Status of Power System Transformation 2018: Advanced Power Plant Flexibility.
Technical, economic and institutional policy layers mutually influence each other and have to be addressed in a consistent way to enhance power system flexibility.
Redefining the role of system resources
The rising importance of system flexibility has far-reaching consequences for all resources on the power system. This section highlights three main shifts: differentiating the contribution that generation and storage make to the system (energy volume vs energy option), the evolving role of grids, and measures to actively shape demand.
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China Power System Transformation |
Power system transformation and flexibility |
Differentiating energy volume and energy option contributions
Historically, baseload, intermediate and peaking plants helped meet specific segments of electricity demand at least cost by providing the appropriate mixture of energy and capacity. From a technical standpoint, these plants were designed with these specific operating conditions in mind. From an economic standpoint, the plants were financed under the expectation of a certain number of operating hours. Today, as a new generation of technologies with distinct cost structures and technical characteristics enters power markets at scale, many existing power plants are being asked to operate with greater flexibility, and in some cases for a reduced number of operating hours.
In order to appreciate this shift, it is useful to consider the role of power plants based on two types of system contribution: (1) energy volume contribution and (2) energy option contribution.
Energy volume contribution is an indicator of the extent to which a power plant provides lowcost, bulk energy to satisfy demand over a given time period. As a way of comparison with the traditional plant categorisation, a plant with a high energy volume contribution would be comparable to a baseload coal or nuclear power plant running near maximum output in a system with low VRE generation and dominated by thermal generation technologies. In modern power systems with least-cost dispatch, VRE plants at very high shares have an essentially pure energy volume contribution. They are dispatched at full capacity whenever the wind or solar resource is available and the system can accommodate them, due to their nearzero operating costs.
Energy option contribution is an indicator of the extent to which a power plant is available to satisfy demand for energy and other critical system services over a given time period. Thus, a plant can be characterised as having a higher energy option contribution role if it is consistently available to commence production when needed. Under the traditional power system categorisation, peaking plants such as open-cycle gas turbines (OCGTs) could be seen as predominantly contributing to the system via a high energy option contribution. Despite running few hours during the year and at infrequent intervals, they contribute to the system by allowing system operators the option to call on them whenever required, providing important value to the system.
Building on the notion of how important the energy volume and energy option contributions of a generation resource are, it is possible to derive a more general characterisation of power plants. The traditional categories of baseload, mid-merit and peak-load power plants can be captured in this approach.
It is worth noting that this approach places power plants according to how they are used in a given power system, rather than what they were technically designed to provide or are theoretically capable of providing. For example, as a result of new operational patterns, it is possible for power plants to shift from an energy volume-focused contribution (e.g. a coal-fired plant in traditional baseload operation) towards a more energy option-focused contribution, which implies greater flexibility (e.g. a traditionally baseload coal-fired plant providing balanced energy volume and value contributions).
An advantage of viewing system resources in terms of their system contribution is that it allows for comparison of alternative resource types. For example, due to their speed of reaction and precision, battery storage may be used for a similar energy option contribution as an OCGT unit.
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IEA. All rights reserved
China Power System Transformation |
Power system transformation and flexibility |
Evolving grids
Historically, power grids have been designed to transport electricity from centrally operated generators to serve the load. As a result of the rising penetration of DER and the intelligence of all grid components, local grids are able to facilitate bidirectional flows of both electricity and data, giving rise to much richer and more complex interactions between devices on the grid at all levels (Figure 14).
Figure 14. Impact of decentralisation and digitalisation on local power grids
Source: IEA (2017a), Status of Power System Transformation 2017: System Integration and Local Grids.
The combination of decentralisation and digitalisation introduces bidirectional power and data flows.
Lowand medium-voltage grids were traditionally designed to passively distribute power from high-voltage networks to end users at lower voltages. Planning standards, which dictated the provision of electric power distribution infrastructure, were based on simplified and often conservative assumptions about future electricity demand. Once in place, there was little need for active management, and hence system operation often amounted to clearing faults and replacing components as and when needed. The demand profile of smaller, residential consumers was reasonably well understood and fairly homogeneous, so it was usually sufficient to read meters once a year or every few months. Demand was generally not actively managed – apart from simple systems that prioritised use at night (e.g. electric space heating, water heaters) (IEA, 2017a).
This picture has begun to change. A number of drivers are aligning to change the way local grids are planned and operated today, including substantial penetration of DER, digitalisation, business model innovation, and cross-sector coupling between electricity, heat and transport. Looking further into the future, these trends may substantially reshape this part of the energy system, increasing its importance as a critical part of a more reliable, cost-effective and clean energy system (IEA, 2017a).
From passive demand to load shaping
In the context of power system transformation, it is useful to consider a generalised concept of demand-side integration, which goes beyond the standard concepts of demand response and management and takes a fresh look at energy efficiency. Essentially, growing shares of VRE can be integrated into power systems by better matching electricity demand to an increasingly variable supply. This is possible not only via dynamic shifts in electricity consumption, but more generally by any intervention that shapes demand to better match available supply. This can be achieved in four different ways:
Dynamic shifting of load. This type of load shaping takes into account short-term or realtime information and control signals to adjust consumption. Most importantly, this type of load shaping does not reduce total consumption, but shifts the time when it occurs. For example, an electric water heater with a storage tank may need to be charged for four hours of the day, but these hours can be chosen flexibly. Hence, if there is a spike in wind
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