WindEconomics: Managing variability costs rise with renewables

The additional costs an electricity network incurs to manage variable sources such as wind and solar PV are a frequent topic for debate.

These costs are quite small when the contribution from wind and/or PV is also small (up to 10-15%, on an energy basis), but variable renewables now account for substantial inputs in various regions and their contribution is growing across the globe.

As the share from wind rises, so do the additional costs of managing variability, and this has spawned proposals for "levelling the output" of wind.

While "dedicated storage" at individual wind turbines or wind farms is not necessarily the most economic solution, the situation may be different in certain locations, particularly with high local levels of wind-energy penetration.

The Australian Renewable Energy Agency recently published a report examining the costs of what it terms "dispatchable renewable-energy options", which provides a basis for assessing the most economic mix of renewables plus storage.

The study concludes that wind and PV systems linked to modest amounts of storage (one to six hours) can deliver electricity at less than double the generating cost from standalone wind or PV.

Reference price for new-build wind is $46/MWh. The electricity price from new-build gas in Australia, is around $A145/MWh ($106/MWh).

The report considered a number of storage technologies, but only batteries and pumped hydro were found able to deliver electricity at prices within the target range.

The technology and storage combinations able to achieve this are summarised in the table and the corresponding electricity prices are shown in the chart.

Batteries vs pumped hydro

The impact of increased storage times on electricity costs depends on whether pumped hydro or batteries are used. Pumped hydro has a higher capital cost, but extra storage capacity costs relatively little.

Batteries, by contrast, have a low capital cost, but extra capacity is more expensive.

The figures used in the study put the energy-related costs of batteries at nearly 20 times the corresponding figure for pumped hydro.

The report notes that one hour storage enables "immediate smoothing and firming of wind or PV generation" and so may enable plant operators to participate in markets for short-term reserve.

The longer storage times enable plant operators to provide electricity at peak times, when prices are likely to be high.

The characteristics of solar thermal systems are quite different from those of PV systems, and the report suggests that they only become competitive when the storage system has a capacity for at least six hours.

This is because the initial capital costs of the storage system are high, but incremental storage can be added at relatively low cost.

The report also evaluated hydrogen as a possible storage medium, but concluded that it did not appear to be competitive for storage times up to 40 hours.

The cheapest option, with a 12-hour store, would deliver electricity at $166/MWh.

Offshore wind could cut UK consumer bills

In the UK, the Department for Business, Energy and Industrial Strategy has announced the administrative strike prices for the next competitive auction, to be held in May 2019, for "less established" technologies.

These include three biomass-related technologies, plus geothermal, wave, tidal stream, remote-island wind and offshore wind.

The ceiling for offshore wind is by far the lowest, at £56/MWh, for projects due to be completed in 2023/24, and £53/MWh (2012 prices) for projects due to be completed in 2024/25.

The latter price, rebased to 2018 levels, corresponds to around $75/MWh.

The wholesale price of electricity is currently around $77/MWh, and if it stays at or above this level — and/or the prices realised in the auction are lower — this would mean that offshore wind would save the consumer money.

At a glance — This month’s report conclusions

Comparison of dispatchable renewable electricity options, Australian Renewable Energy Agency, 2018 Analysis of the levelised costs of energy from PV and wind when linked to pumped Hydro, batteries and hydrogen for storage.