(The author is a Reuters market analyst. The views expressed
are his own.)
By Gerard Wynn
LONDON Nov 30 Subsidised renewable energy cuts
peak power prices, but is also unreliable, and in most countries
the cost of balancing its intermittency is borne by dispatchable
(available on demand) fossil fuel and nuclear power.
Dispatchable power providers are pressing claims for
subsidies to provide this backup, which would not only keep the
lights on but also stop power prices spiking out of control
every time they have to step in when wind or solar fails, as can
be the case.
Without support for these balancing services some forms of
dispatchable power will become uneconomic and unsustainable,
because renewables generate power at zero marginal cost.
In the short run, the most affected technologies will be
those with higher generating costs, including flexible gas-fired
power plants which grid operators presently use as a standing
But in the long run, high capital cost coal and nuclear will
also suffer because lower average peak power prices will make it
more difficult for them to raise finance to build new plants,
according to a new study by the OECD's Nuclear Energy Agency.
At present, there is little evidence that European
policymakers have fully thought through the problem, for example
about whether they subsidise balancing services, and if so, gas,
nuclear or coal.
Figure 1: link.reuters.com/hud44t
Figure 2: link.reuters.com/kud44t
Grid operators already need reserve capacity to respond to
variations in demand and unexpected tripping of conventional
There are two types of reserve: an operating reserve that
must be available within 10 minutes or so, and a replacement
reserve which takes over within an hour.
For operating reserve there are various options, including
flexible offline capacity which can fire up from cold very
quickly (called a standing reserve), or a spinning reserve of
online plants which are already running at part-load and can
ramp up by applying more torque.
Open cycle gas turbines (OCGT) have the fastest start-up
These simple power plants were introduced decades ago to
supply peak-load service: air is compressed and used to fire
natural gas in a combustion chamber which drives a gas-turbine
and electricity generator on a single shaft.
They have rather low electrical efficiency because they fail
to recycle hot exhaust gases.
But their simplicity gives them a quick start-up time of 10
to 20 minutes, according to the NEA's "Nuclear Energy and
Renewables: System Effects in Low-Carbon Electricity Systems",
published on Thursday.
Since the early 1990s, combined-cycle gas turbines (CCGT)
have become the technology of choice for new gas-fired power.
They use gas-turbine exhausts to generate steam that drives
an additional steam-turbine generator to produce more power.
They have electrical efficiencies of 60 percent or more.
From cold, they have a slower start-up than OCGTs, at 30-60
minutes, according to the NEA, but still faster than coal, at 1
to 10 hours, and nuclear, at two hours to two days. (see Figure
Intermittent wind and solar power now accounts for a
significant and rapidly rising share of electricity generation
in some European countries, notably Denmark, at 28 percent last
year, as well as Spain (18 percent) and Germany (11 percent),
according to BP data.
Markets in these countries where penetration of renewable
energy is high have been up-ended, driving down average peak
wholesale prices and hitting the profitability of traditional
OCGT is the most vulnerable to a mainstreaming of renewable
power, given it has the highest generation costs.
The NEA report estimated that OCGT profitability would drop
by more than 80 percent when wind power reached a third of
installed capacity, while the profits of even least-impacted
nuclear power would fall by more than half. (see Figure 2)
But if countries start paying for balancing services, such
calculations will be again turned on their head.
Some gas engine suppliers sense an opportunity, such as
Finnish power plant engine maker Wartsila, which is
marketing a gas plant which can shut down the combined cycle of
a CCGT, to ramp up faster.
The NEA says it sees a new role for nuclear power, as the
least carbon-emitting dispatchable option.
Nuclear is usually operated as baseload, meaning power
plants are run for more than 5,000 hours annually.
That is partly for economic reasons, to capitalise on low
running costs and pay back the high, upfront capital costs, as
well as safety ones, connected with control of core temperature
and constraints imposed by the life-cycle of the fuel rods.
More frequent cycling of the power plant could also speed up
materials fatigue, says the NEA.
After taking those constraints into account, online nuclear
power plants can be ramped up and down about as quickly as a
coal plant, the NEA said, adding that French nuclear power was
already used to vary output according to demand.
However, the NEA's own estimate of nuclear power start-up
and ramp-up times suggests it may struggle to compete with gas.
Governments are struggling to keep up with the demands of a
more variable grid.
European Union policy for example focuses on the adequacy
(amount) of member states' reserve capacity, rather than their
"Currently, the ENTSOE (European Network of Transmission
System Operators for Electricity) generation adequacy assessment
does not focus on the flexibility of the system, and its ability
to cope with large swings in the feed in of variable wind and
solar generation," said a European Commission paper consulting
on generation adequacy, published earlier this month.
And where the need for flexibility is recognised, supply
options have a job competing with alternatives, including
demand-side responses (cutting supply at peak times to
consenting users) and smart grid options.
Britain's Department of Energy and Climate Change in August
published a report, "Electricity System: Assessment of Future
Challenges", which focused on these rather than using more
flexible power plants.
And Germany on Thursday passed legislation where grid
operators could agree to pay industrial consumers to interrupt
their supply and so provide flexibility at peak times.
(Editing by Sonya Hepinstall)