Electricity on the road to Net-Zero: challenges and solutions
Challenges caused by increasing electricity demand cannot be solved in the conventional way. The growing share of renewable energy introduces the challenge of intermittency problems. Solving the supply-demand mismatch requires a range of flexibility solutions. Solutions are energy storage, expanding networks, and flexible demand.
Challenges caused by increasing electricity demand cannot be solved in the conventional way, that is, by increasing supply and expanding the grid
The growing share of renewable energy introduces an extra challenge in the form of intermittency problems
Solving the supply-demand mismatch requires a range of flexibility solutions. Solutions are energy storage, expanding (Europe-wide) networks, and flexible demand
In this note we discuss the challenges arising from increasing electricity demand. The challenge is not only to increase the power supply and to expand grid capacity, but also a matter of balancing supply and demand. A range of solutions in the form of energy storage, expanding (Europe-wide) networks and more flexibility in demand, will play a key role in solving the supply-demand mismatch. This is the last of a three notes series on the electricity sector. In our first note we showed the differing trends in electricity demand for OECD countries and emerging markets over the last 10 years (see ). In our second note we concluded that energy demand will rise in the coming years because of decarbonization and prioritizing energy security (read our second publication ).
Grid congestion
The growing demand for electricity is not without challenges. If electricity demand outpaces the expansion of the electricity grid, then this will cause grid congestion. When the load on the grid exceeds its capacity, the cables and transformers can deteriorate due to overheating, transportation losses become bigger and there will be a higher risk of blackouts. The mismatch between demand and supply is already evident in the Netherlands where more and more places face waiting time for a new connection to the grid. The left figure below shows the current status of the grid capacity in the Netherlands. Areas in red indicate a structural congestion, meaning that new requests for heavy connections (bigger than 3x80A) are not approved. This is not only a problem in the Netherlands. For example Germany and the UK are also facing congestion problems.
Limitations to expanding the grid
Crucial for the grid to handle the growing demand for electricity are substantial investments in grid capacity. This means increasing the capacity of the cables and transformers (grid reinforcement) to ensure the load continues to fit within the grid. However, this is expensive, time-consuming and the process is capital and labour intensive, while there is limited availability of capital and labour resources. In other words, this is not going to fix the problem anytime soon, nor would it be a cost-effective longer-term solution.
A new challenge arises
It is not just that demand is too strong for grid capacity, but also a matter of demand and supply not being balanced. Because electricity supply will be more and more generated by renewable energy sources (see the figure above on the right), there is not a continuous power supply. Electricity supply will depend more and more on when the sun shines or the wind blows. We already have time periods in the day where we generate more than we need. Solving the supply-demand mismatch will require a range of flexible solutions. Proposed solutions are energy storage, expanding (Europe-wide) networks, and flexible demand. These solutions are discussed below.
Energy storage
Storing energy when there is excess supply and discharging later when demanded, forms part of the solution to deal with the unbalanced grid. There are different technologies possible for energy storage systems. According to the European Association for Storage of Energy (EASE) we can classify these different technologies in : chemical, electrochemical, electrical, mechanical and thermal. Different technologies have different timeframes ranging from seconds to seasonal periods.
Storage systems based on lithium-ion batteries currently still dominate the market, but this technology is the most cost-effective solution for short-duration storage. The main challenge is to find large scale working solutions for long-duration energy storage (LDES) – that is, any system capable to discharge energy for 10 or more hours. These solutions are at various levels of technological maturity. In terms of long-duration energy storage, the current benchmark is pumped hydro storage. When excess electrical energy is available, the water will be pumped and stored in an upper reservoir. When necessary, the moved water can be used to generate electricity. According to , this technology will continue to dominate the market until 2030. Similar mechanical solutions include the movement of mass or compression of air. Other solutions involve new battery types, for example, thermal batteries or flow batteries. However, these are still at a pilot phase.
Long duration energy storage will play a key role in delivering net-zero by 2050. The next step is more market uptake, because without that, it will be impossible to achieve a net-zero power system and a balanced grid. At the COP26 in November 2021, the was confirmed. The LDES Council’s concludes that LDES could represent between four and seven times the total global TWh of lithium-ion capacity today by 2040, requiring an investment that could reach between USD 1 to 3 trillion. In order to realise this, large deployment is required now and governments need to establish a supportive ecosystem.
Expanding and upgrading the European-wide networks
The EU has set an for member states. By 2030, there should be enough interconnectivity cables such that at least 15% of produced electricity in one member state can be exported to neighbouring countries. Connecting allows Europe to integrate more renewables into the system. By making the European grids more connected and upgrading their transmission capacity, all connected regions can have better access to more diverse energy sources. Giving regions access to abundant solar power from regions where the sun is shining, or utilize wind power generated where the wind is blowing strongly. For example, Britain has major offshore windfarms. Periods with powerful and light winds can be forecasted. Therefore, others can anticipate how much to import based on Britain’s weather forecast. By unlocking the geographical diversity of renewable energy sources across Europe, the region as a whole can benefit most from the abundant availability in connected areas. However, similar to the national grid, increasing the capacity of the cables takes time. The planning and building of wind-parks and solar plants are typically faster than building long-distance, high-voltage lines.
Flexible demand
Changing the pattern of electricity use can help match supply and demand. We are used to consuming energy at any given moment of the day without thinking about the available supply. This is historically logical if electricity is generated by powerplants that can be turned on and off to match demand. However, with more and more renewable power sources, this is not the case. Therefore, instead of supply having to match demand, making demand more flexible is an efficient part of the solution of the mismatch.
Dynamic electricity price contracts become more and more available to consumers. First in the Nordic markets, but currently in like the Netherlands, Spain and UK. With dynamic price contracts, the electricity price is linked to the wholesale market and changes every hour, half-hour or even 15 minutes depending on the supplier. This means that during peak moments prices go up, while during off peak moments or when production is high prices go down. Tariffs can even be negative in case there is a lot of renewable energy available. Consumers on a dynamic contract are therefore incentivised to consume energy at the right moments to help balance the grid. However, dynamic prices in combination
with scaling down of the net-metering scheme could make the investment in solar panels for home owners less attractive, see . A potential solution to overcome this is the use of home batteries. Turning demand into more flexible demand seems a solution for fixing part of the supply-demand mismatch.
Concluding remarks
The electricity sector sits at the centre of the decarbonisation process. In order to achieve net-zero by 2050, the sector will have to decarbonise and expand, and extensive new investment will be required in storage capacity, grid reinforcement and expansion of the distribution and transmission networks. Demand will also have to adjust, and this will involve continuous improvements in energy efficiency and balancing of supply and demand to address the intermittency problem of renewable energy. The importance of energy efficiency is embedded in net zero scenarios such as those from the IEA and the NGFS. Additional policies and investment will be required to balance demand with supply, and this could come in the form of pricing incentives and connecting distribution networks across local, regional and national government boundaries.