Renewables Integration- New Business Models Are Needed

As renewable generation grows, there will be a growing need for successful business models.
Published: Wed 29 Jan 2014

There has been significant growth in the renewable energy market over the last 10 years, thanks to supportive government policies, escalating costs of conventional energy, and new technology developments.

As a result of this growth in renewables, the power industry is experiencing huge logistical and technical challenges in adapting the current infrastructure to accommodate integration into the utility power grid. For the first time in many years, utilities are being forced to invest in their grids in order to accommodate this growth.

Renewable integration is not just about hardware but also about how power markets function. Utilities have a number of options available to them when attempting to balance variable renewables. Also, each grid is unique and as a result, solutions will be diverse and will vary according to specific needs.

Renewable integration challenges

The variability of Renewable Energy Systems poses a real challenge for system stability. To resolve this, renewable energy systems must take part in the delivery of system services, consumers must be incentivised to use power when it is available, storage prices need to decrease, and for the periods when renewable power is low, more reliance will be placed on biomass and gas-fired plants to fill the energy gap.

In Europe, a robust Trans-European grid will need to be developed in order to connect all the resources. Public acceptance of generation, storage, transmission and distribution grids, as well as their affordability, may pose additional challenges for the power sector.

Adopting a holistic view

The whole energy system will need to undergo transformation. Therefore, investment will need to be shared across the entire system. Subsidies in one part of the system will attract additional investments in other parts of the system.

It is often difficult to decide where investment is needed most but a holistic view of the system will give decision-makers the ability to prioritise.

The role of energy storage

Energy storage already plays a major role in renewable generation, says Paul Giesbertz, Head of Infrastructure and Market Policies at Statkraft Markets B.V in the Netherlands. He explains that existing hydro reservoirs in the Nordic and Alp countries offer the cheapest source of flexibility. He points out that the untapped potential in the Nordic market is still significant and further development of DC-cables to the Nordic market is therefore critical.

He points out that investment costs, related to cable projects, will be recovered easily by taking advantage of the price differences between the two markets, even in times when there is no need for additional flexibility.”

Other storage technologies will come on to the market at a rapid rate due to the cost reduction in batteries. Mr Giesbertz points out: “However, we do not need to explicitly support the development of storage, for example by placing the responsibility for storage under the regulated domain of TSOs. The market will determine what role storage will play in the future.”