ECPA Newsletter

The Power of Flexibility

Wednesday, May 06, 2020
Solar and wind plants are springing up everywhere, but the electricity grid cannot always take maximum advantage of the clean energy they produce. As countries in the region ramp up their targets for renewables, they need to ensure that their power systems are flexible enough to accommodate ever-larger amounts of intermittent generation. That is doable—even 100% renewable energy is doable in some cases—but it will require governments to put new policies in place that reward flexibility, one energy company executive says; otherwise, a lot of that wind and solar will just go to waste.


To capitalize on the full potential of renewables, countries will need to completely rethink their energy strategies, said Paul Smith, Director of Development for Wärtsilä North America, Inc., a subsidiary of Wärtsilä Corp. of Finland. Instead of building conventional thermal plants to cover their basic needs and then adding renewable energy on top of that, they need to design the entire system around renewable energy, he said.

That means developing electric sector policies and regulatory frameworks that put flexibility “front and center,” Smith said at the Fourth Ministerial Meeting of the Energy and Climate Partnership of the Americas (ECPA), held in February in Jamaica. He was one of several representatives of the Americas Business Dialogue who spoke during a plenary session with the private sector.

In a subsequent interview for the ECPA newsletter, Smith—whose area of responsibility at Wärtsilä covers the Americas—explained that many countries in the region have set high targets for renewable energy penetration but continue to add “inflexible” units into their power systems with the idea that they will incorporate renewables down the line.

“The reality is that every time they go out there for tenders to put some new power generation in, they’re just making the system less and less flexible, and therefore the chances of reaching that target are less and less,” he said.

This is the result, he said, of traditional thinking about power systems: “As engineers, we’re all trained to go for efficiency.” When engineers and utilities and regulators do power system planning, they tend to look at what type of plant can deliver the lowest cost of energy over time. The answer, according to Smith, is often a combined cycle gas turbine plant.

“When it’s running baseload, essentially it’s the cheapest power because it’s the most efficient unit,” Smith said. “The problem is, it’s a completely inflexible unit.”

That isn’t an issue if only a small percentage of power generation comes from intermittent renewable energy sources, he said. But once the percentages of wind or solar become significant, the goal is to maximize the electricity generated from those clean, inexpensive resources and use other types of energy—such as hydro, battery storage, or thermal generation—to balance out the intermittency. That balancing act sometimes must happen minute by minute, if the wind starts to die down or the sun retreats behind a bank of clouds.


Modeling Power Systems 

Sophisticated computer models can help identify optimal solutions for electricity grids, depending on each country’s needs, priorities, and constraints. Wärtsilä, which makes engines for ships and power plants,has run these types of models for more than 140 countries around the world, including many in Latin America and the Caribbean, according to Silvia Zumárraga, General Manager for Market Development for Wärtsilä North America. The company recently modeled the state of California to show how it could achieve its goal of 100% clean electricity. 

Wärtsilä first got into supercomputer modeling for internal purposes, to better understand the markets where it was selling equipment; eventually, it started sharing the information with development finance institutions, governments, and other stakeholders, Zumárraga said. The company does not charge for this service to avoid any appearance of conflict of interest, and it is transparent about the assumptions it is making when it runs the numbers, she said.


As with any projections, the better and more complete the data, the more accurate and useful the model. In some countries, all power system data is publicly available, and it’s a matter of sitting down with policymakers to identify the right parameters. If the goal is to reach 40% renewable energy penetration by 2050, for example, the model will map out the best path to get there, given the current configuration of the country’s electricity system.

That doesn’t mean that the country will necessarily take the advice or buy Wärtsilä equipment, according to Zumárraga. “We can show the way to reach higher targets of renewables, but you cannot force them” to follow that path, she said.

But that gas turbine plant that churns out baseload power so efficiently is not designed for fast stops and starts; it’s designed to run steadily. In fact, the independent power producer operating it is probably receiving a “capacity payment” for making the plant available. That creates an incentive to keep the plant running as much as possible, and as a result, much of the wind and solar power on tap is not used. “You’re just throwing it away,” Smith said.

To make the best use of intermittent renewable energy, he added, “you don’t want the most efficient unit, you want the most flexible unit in the system that can allow that renewable to basically generate everything it can.”


Incentivizing Renewables


Making the most of renewables requires not just technical considerations but policy and regulatory ones too, according to Smith. In the case of a government-controlled monopoly utility, he said, it’s a relatively straightforward process of setting clear targets and determining how to reach them.

However, in the case of unbundled services—in which electricity generation, transmission, and distribution are handled separately—the system must build in incentives for independent power producers to add renewables, Smith said. In other words, instead of simply rewarding the ability to provide efficient baseload capacity, regulators should reward flexible generation that can enable the entry of more renewables.

“That’s a different compensation mechanism, and it has to be evaluated in a completely different way,” Smith said.

“The first thing that’s needed is the political will,” he said. “It’s one thing to talk about it. It’s something else to actually roll one’s sleeves up and have a government actually start implementing the policies, the regulations to make it happen.”

But with global oil prices so low—even dipping into negative territory recently—will governments still be interested in renewables?

“My personal belief is that the renewable push will continue,” Smith said. “I think the drive is there, the will is there.”

Development finance institutions will have a role to play in keeping the focus on renewable energy, he said—especially as they put together aid packages to help countries recover from the Covid-19 crisis. In the meantime, Smith said, the drop in oil prices is a bit of positive news for economies in the region that have seen tourism disappear due to the pandemic. As terrible as the situation for them is now, he added, “imagine what it would be like if this had hit when we were at $90 a barrel.”