AleaSoft Energy Forecasting, November 26, 2021. Storage and its hybridisation with renewable energy technologies will play a key role in the energy transition, from managing the variability of renewable energies to avoiding curtailments and the cannibalisation of market prices. The optimisation of hybrid and storage facilities presents an important optimisation challenge to make them truly efficient, an optimisation in which Big Data and Artificial Intelligence will play a very important role.
The environmental objectives of the European Union are ambitious. By 2050, the goal is achieving the climate neutrality where the net emission of greenhouse gases will be zero.
The first step is the objectives to reduce CO2 emissions and other greenhouse gases by 55% by 2030 compared to emissions levels of 1990. For this, renewable energies must account for at least 32% of total consumption of energy. With these objectives, it is clear that renewable energies, especially wind energy and photovoltaic energy, are going to need an unprecedented boost and investment.
Compared to fossil fuels, gas and coal, power plants, much more installed wind and photovoltaic energy capacity is needed to replace each thermal MW. This is due to the intrinsic variability of renewable energy production and its dependence on meteorological conditions, wind and solar radiation. This disadvantage is compensated by three factors.
Towards a 100% renewable energy mix
The first factor is the volume. With a large amount of renewable energy MW, a sufficient minimum production is ensured at all times.
In second place, there is storage. The fact of having energy storage systems allows storing the surplus energy, at times of high production and low demand, and having stored energy at times of insufficient production and high demand. The storage systems can function as independent installations connected to the grid, which extract and supply energy according to the needs of the system, or in hybrid installations associated with renewable wind or photovoltaic power plants, so that they can store part of the plant’s production and supply it to the grid at a later time.
Regarding storage technologies, there are short‑term systems, such as batteries or solar thermal power plants, that can store energy for several hours and that normally work with daily charge and discharge cycles. Then there are the reversible hydroelectric power plants, the so‑called pumping power plants, which can also work on a weekly basis, when the charging and discharging cycles can be extended for several days.
Reservoir hydroelectric power plants also play an important role in managing the energy they accumulate in the form of potential energy of the stored water. In this case, it is possible to speak of mid‑term or seasonal storage, since the management of dammed water is carried out with a yearly vision, at least. Among seasonal storage systems, green hydrogen must also be considered, which will also play a key role in the replacement of gas and oil in industry and transport.
Finally, the last factor to compensate for the variability of renewable energies is the hybridisation of technologies. Combining in the same plant different renewable energy technologies that depend on different natural resources, such as wind and solar energy, allows the plant to produce more constantly as it does not depend on a single natural resource. In addition, natural resources such as wind and solar radiation are relatively complementary, so that the low availability of one corresponds, on average, with a greater availability of the other.
In Spain, the 2030 targets are set out in the Integrated National Energy and Climate Plan (NECP) and aim for a wind energy capacity of 50 GW and a photovoltaic energy capacity of 39 GW. Its target scenario also contemplates 2.5 GW equivalent of batteries with a minimum of two hours of storage at maximum load.
Impact of the storage on the market
The role of storage and hybridisation in counteracting the variability of renewable energies will have important consequences in the electricity markets. On the one hand, being able to store surplus renewable energy will allow reducing and even eliminating curtailments of renewable energies, energy wasted as it cannot be injected into the grid.
On the other hand, being able to manage the production of renewable energy will avoid the dreaded cannibalisation of market prices during the hours of peak renewable energy production. By allowing the management of renewable energy production, it will no longer be concentrated during the hours of maximum solar radiation or during episodes of high wind.
The impact that the introduction of storage will have on the market is analogous to the impact that the increase in interconnection capacity with France and the other European markets will have, and already had. The doubling of the interconnection capacity with France in October 2015 led to greater stability and less volatility in market prices, since the interconnection can be considered “a large battery” where a large amount of energy can be injected (exported) or consumed (imported).
Storage in renewable energy auctions in Spain
The ministerial order TED/1161/2020, of December 4, regulates the auction mechanism for the granting of the renewable energy economic regime (REER) and establishes an indicative calendar until 2025 with auctions for 8.5 GW of wind energy and 10 GW of photovoltaic energy.
The auctions allow the granting of capacity to plants that include energy storage systems as long as these systems only store energy from the production of the renewable energy plant and, in no case, from the grid.
Plants with storage under the REER will have an exposure to market prices of 25%, unlike plants without storage, in which case the exposure will be only 5%.
Storage in future capacity auctions in Spain
The Ministry for the Ecological Transition and the Demographic Challenge published in April a proposal to create a capacity market in accordance with the provisions of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity and with the aim of continuing to advance in the integration of renewable energies in the generation mix in line with the objectives established in the NECP.
The order will also be a key instrument for meeting the objectives of the Energy Storage Strategy. Among them is having a total capacity of about 20 GW in the year 2030.
The Ministry’s proposal consists of a centralised system in which the system operator, Red Eléctrica de España (REE), will contract the required firm power. This is the power that a facility can offer depending on the needs to cover the demand in all time horizons.
The power will be contracted through pay‑as‑bid auctions, where the facilities offer the price they are willing to charge for the availability of their firm power capacity, and that is the price they are paid if their project is awarded. The participants in these auctions may be consumer, generation or storage facilities, including self‑consumption facilities, provided they meet the established requirements.
The proposal contemplates two types of capacity auctions. The first, of yearly periodicity, which will require the capacity service provision for a five‑year period. The second, the adjustment auctions, also yearly but associated with a twelve‑month service provision period to resolve possible coverage problems that are not going to be covered by the main auctions.
How to use artificial intelligence to maximise revenue with storage and hybridisation
Storage and hybridisation present a significant management challenge to be truly efficient. Finding the way to manage them in the most efficient way possible is an optimisation problem that requires a lot of data and a lot of computational capacity, a perfect field for Big Data and Artificial Intelligence.
AleaSoft Energy Forecasting has more than twenty years of experience providing prices, demand and renewable energy production forecasts for the most important generation companies in the sector. Forecasts that use Artificial Intelligence and that were necessary inputs for the optimisation of the hydroelectric, pumping and combined cycle gas turbines energy production. These optimisations contemplate both the sale in the daily market and in the intraday markets, the secondary and tertiary band and the deviation markets.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe
The first webinar of 2022 of the series of monthly AleaSoft Energy Forecasting’s webinars will take place on January 13 and will feature the participation of speakers from PwC Spain, who will analyse how the regulatory and electricity market situation impacts the development of PPA, both off‑site and on‑site. In addition, as always, the evolution of energy markets in Europe and their prospects for 2022 will be analysed.