Never before has the energy system been more complicated than it is today. With increasing numbers of distributed generation assets, grid operators are tasked with ensuring the stability of the system – and continuing to do so at a competitive cost.
Solar photovoltaics has experienced a major uplift buoyed by global uptake in residential and small C&I assets. Over the past two decades, the European power system has increasingly featured more distributed assets, which have yet to be optimized.
Through ingenuity and the development of synergies between sectors, energy system engineers from around the world have found a way to not only offset the strain that variable renewable energy assets can put onto the grid, but to also use them in building network resiliency – at a price point more attractive than conventional methods.
In markets with a high penetration of distributed assets, the question of how best to accommodate the use cases of these assets has come up. Intelligent software solutions have been brought to the market by a plethora of power electronics companies, utilities, and other new stakeholders in the energy business. Solutions such as virtual power plants (VPPs), smart grids, and microgrids provide compelling examples of resilient and cost-effective grid infrastructure.
To pull this trick off, inverter manufacturers have started leveraging proprietary Internet of Things (IoT) applications into their equipment. According to IHS Markit nearly 11 million solar inverters will be sold in 2019, presenting an enormous number of data points which could add significant value to infrastructure if used smartly. Connect, collect, compute, and create: This is the new model for the energy ecosystem. The days of relying solely on poles and wire are over.
While still in its infancy, the market has already made strong use cases for VPPs, microgrids, and smart grids. A high degree of expertise in digitalization of the energy system has become a critical aspect for each inverter manufacturer to survive in the years to come.
Microgrids versus blackouts
One example for such new business cases is Finland. After a series of blackout events in 2011 and 2012, Finnish policymakers reacted by setting a price on power outages. Since 2013, distribution system operators (DSOs) have been obliged to compensate customers for grid downtime, staggered into six incremental increases depending on duration. For example, a single event outage of 12-24 hours will incur a 10% reduction on annual delivery fees. Outages of 120-192 hours provide a 100% discount, whereas outages of more than 288 hours will result in a 200% compensation. With this market mechanism in place, for many DSOs, it was simple to determine the cheapest option to address the issue: microgrids. Research performed by Lappeenranta University of Technology (LUT) found the lowest cost option for 10‒40% of medium voltage branch lines to be low-voltage DC microgrids, according to Navigant’s Peter Asmus.
Microgrid deployment will allow for interferences or damages to one part of the grid, such as snow on the power lines, without impact to other parts of the grid further down the line. Smartly managed distributed generation assets in each town and village can maintain base load power, even when power lines in a nearby village have collapsed.
Virtual power plants
Europe’s power grid can be further supported in stability through the implementation of VPPs. Grid ancillary services can be provided by virtual power plants at a price point more competitive than conventional means.A VPP is a network of decentralized power generating units tasked with balancing the grid, facilitating the integration of large renewable energy capacity into existing energy systems. With a central IT control system that can network and monitor all participating distributed energy resources, VPPs can be operated as traditional power plants with one big advantage – flexibility. As the cloud is fed with all information about the interwoven units and the power grid, VPPs can assume a role in frequency regulation, and also adapt to the continuously changing electricity price when selling output on wholesale markets.In some European markets, VPPs are already allowed to provide grid ancillary services, and the financial outlook is promising. The German regulatory authority, Bundesnetzagentur, publishes its monitoring report which lists costs for grid ancillary services in the country each year. In 2017, these costs came in at close to €2 billion. The cost to provide primary, secondary, and tertiary balancing reserve is about €145 million. A considerable portion comes from compensation for curtailment at €609 million and re-dispatch claims of €291 million.
With virtual power plants, grid operators can tap into distributed solar assets to tackle these costs for a fraction of the price. The EU’s new clean energy package foresees a slow turn toward market-based approaches for curtailment and re-dispatch. The package identifies the vital role of VPPs and permits their use in ancillary service markets. As of now, policymakers have not yet paved way for the technology to address the costly issues of re-dispatching and curtailment. However, the path could be inevitable.
Rural electrification mini-grids
For more than one billion people in the world, electricity remains unattainable or limited. With economic development and modern health services hinging on electrification, this creates severe impacts on the lives of a large proportion of the planet. The UN has put electricity supply far up its agenda in its Sustainable Development Goals.Distributed PV projects working as mini-grids are a cost viable solution to addressing the global electricity challenge. The generation assets are cheap, have low operating expenses, and do not require the expansion of grid infrastructure to remote corners of a country.
Strategic investment growth in off-grid solar, mini-grids, and universal energy access projects are climbing. A report by analyst Wood Mackenzie shows sector commitments climbing, with a 37% increase from 2016 to 2017 and a 22% increase from 2017 to 2018. Last year’s investment volume clocked at $511 million. Until February 2019, nearly $1.7 billion had been poured into the sector. In 2017, Huawei developed a rural electrification project with Cameroon’s Water Resources and Energy Ministry. The smart PV solution provider contributed to a scalable solar, energy storage, and diesel generator solution. After completion of the first phase of the project, Huawei’s Microgrid Solar Solution now provides 166 remote villages electricity to the benefit of more than 120,000 people.