100% renewable energy target is no longer a distant dream. Several countries, islands and regions across the world are working towards it as cost of renewable energy technologies continues to fall. Find out what’s driving this transition.
Åland is a group of 6,500 small islands in the Baltic Sea located between Sweden and Finland. Although this archipelago is part of Finland’s territory, it is connected to a grid in Sweden for its electricity because of its proximity to the country. Åland has an ongoing Flexible Energy System Demonstration project (FLEXe) to pilot and demonstrate that a fully renewable, independent energy system on the island is sustainable, technically and economically.
Inspired by this ambition, a few months ago, Wärtsilä engaged in a power system modelling of the island to understand the cost-optimal pathways to go 100% renewable in electricity generation.
“In Åland, wind is the main renewable resource. The main point was to understand how much it would cost to take the last step from 85% to 100% renewables,” says Jyrki Leino, Senior Manager, Wärtsilä.
“In our study and modelling, we compared different scenarios. In high renewable power system modelling, methods need to be chosen carefully so that all system constraints are considered properly. In this case, in order to reach 100% renewable energy power system, we tested power-to-gas solutions and biofuels. In both the cases CO₂-free fuels were used in Wärtsilä engines to balance intermittent wind production,” explains Leino.
Wärtsilä modelled three scenarios for the study. First, a base case where the link to Sweden would be maintained and new capacity would be added on the lowest cost basis. The second scenario had the link to Sweden gradually cut by 2030 and a new Wind, Solar, Batteries, and BioLNG (engine) capacity added on the lowest cost basis. The third scenario had BioLNG replaced with a Power-to-Fuel (PtF) engine to convert excess energy from wind production to gas and then use this gas in Wärtsilä engines to balance intermittent wind production.
The study concluded that assuming the existing generation fleet was used as-is (only wind), and that there was a demand growth of 1% per annum starting from 300 GWh, and no electricity was sold outside Åland, the archipelago could make a gradual transition to 100% renewables by 2030 in three stages.
Stage one will be renewables at 50%, which is optimum from a cost perspective given the current cost level of renewables, power-to-gas and biofuels and could be achieved by just adding wind and curtailing excess or balancing power from Sweden. At stage two, up to 80% renewable energy will be and the balance 20% power would still come from Sweden. During this step, there would be quite a lot of overbuilt of wind generation capacity, some of which would be curtailed during periods of high generation. At stage three, final push to 100% renewables could be achieved either with BioLNG or PtF. Given the current cost level of BioLNG and PtF, the system cost would approximately triple in the case of BioLNG and rise seven times in the case of PtF,. However, the costs of both solutions are likely to fall in the future, making the case for 100% renewable electricity production interesting to pursue for.
In addition, local renewable energy potential, geographical conditions and electricity cost level impact the feasibility of going 100% renewable.
“One always needs to analyse the cost of generation with system/specific input data,” says Saara Kujala, General Manager Business Development, Wärtsilä.
“While we cannot draw any conclusion globally from a single country case, we do see that with the cost of wind and solar falling dramatically, in many cases countries can both lower the cost of electricity production and go up to 80–85% renewable generation even with current cost trends of renewables, storage and flexible generation solutions. And as we build our systems towards higher shares of renewables, we can continue to take advantage of new technologies as their costs fall,” explains Kujala.
According to International Renewable Energy Agency (IRENA), the share of renewable energy in the power sector is likely to increase from 25% in 2017 to 85% by 2050, mostly through growth in solar and wind power generation.
The good news is that the costs of renewable technologies, particularly wind and solar, have fallen dramatically and are likely to reduce even further. According to Bloomberg New Energy Finance’s (BNEF) third-quarter outlook on the Global PV Market, solar panel system costs (fixed axis, utility segment) have decreased by 73% between 2010 and 2018. BNEF’s third-quarter outlook on the global wind market too estimates that the wind turbine price index has dropped from USD 1.75 m/MW to USD 0.85 m/MW from the first half of 2008 to the first half of 2018.
BNEF’s New Energy Outlook 2018, an annual long-term analysis of the world’s power sector until 2050, estimates that in the first half of 2018 alone, the benchmark global Leveraged Cost of Electricity (LCOE) for offshore wind reduced by 5% to USD 118 per MWh. It fell 18% for onshore wind to touch USD 55 per MWh and was 18% lower for equivalent solar PV at USD 70 per MWh. The prices of Lithium-Ion Batteries too have reduced substantially from USD 1000 per kWh to USD 209 per kWh since 2010.
BNEF expects battery prices to fall to USD 70 per kWh by 2030. It predicts that by 2050, the cost of an average PV plant will fall by 71% and the cost of wind energy will drop by 58%. It estimates that of a total USD 11.5 trillion will be invested in new power generation capacity between 2018 and 2050, USD 8.4 trillion will be invested in wind and solar alone and another USD 1.5 trillion will go to other zero-carbon technologies such as hydro and nuclear.
“It is commercially realistic to reach 85–95% renewable level within the next 30 years throughout the world, but the massive wind and solar power plant investments must be supported with short-, medium- and long-term balancing applications,” says explains Veikko Kortela, General Manager, Business Development, Wärtsilä.
Engine power plants are a good way to ensure the lights never go out. They can be fuel-flexible and can handle varying loads to provide operational flexibility to the entire power system. Operational flexibility is paramount when it comes to increasing renewable energy generation because renewable sources are intermittent as they are dependent on natural conditions like the number of hours of sunlight, wind speed etc.
“Engine power plants will have a big role to play because they can provide balancing power using stored fuel produced with power-to-fuel technologies. During transition period, natural gas will gradually be replaced with PtF fuels,” explains Kortela.
Building excessive renewable capacities is also not ideal because it could lead to idle capacity due to commercially unviable large-scale storage and a scarcity of new technologies to convert excess renewable power to fuel or other forms.
“Huge amount of storage capacities is required in the last 5–15% of achieving 100% renewables. That increases the Leveraged Cost of Electricity (LCOE) heavily. But over the next few years we expect technical improvements for storage and all other renewable production supporting technologies and also heavy price cuts due to mass production for some storage technologies,” says Kortela.
But to achieve ambitious renewables targets that are 10–15 years away, utility companies have to ensure that the capacities they chose to invest in today remain relevant in the future. This is because it takes years to build power plants and the average life of a plant could range between 30–40 years.
So how can one future-proof their investments? Multi-fuel engine power plants are the best answer.
“In Wärtsilä engines, you can still use fossil fuels but if you want to give the final push to 100% renewables at some stage, you can easily switch to biofuels,” says Leino.
“Typically, the capacity factor of thermal balancing capacity in a 100% renewable system is less than 10%, which means that the thermal units are not used much for energy and the price of the more expensive biofuel is not that important as it does not have too much of an impact on the total cost. However, it is essential to have this firm thermal capacity in the system for the periods when there is no wind or solar production, or when the duration of the batteries is not long enough,” he explains further. Such solution will also help to reduce the amount of energy storage needed in a fully renewable system.
Apart from financial feasibility, there’s also climate change to consider. The International Energy Agency (IEA) estimates that limiting the rise in global mean temperature to well below 2°C would need the global energy sector to double investments to an average USD 3.5 trillion each year until 2050, decrease fossil fuel investments and offset it with a 150% increase in renewable energy supply investment, investment in nuclear power, carbon capture and storage, and in transmission and distribution grids.
IRENA estimates that renewable energy needs to grow at least six times faster for the world to meet the goals set out in the Paris Agreement, 2015. As climate change-related regulations get tougher, power companies investing in inflexible new capacities could find themselves saddled with high emission plants that may be unusable in the future.
The overall consensus is that with renewable energy growing at a robust 7–8% annually, 100% renewable energy is not too far from reality. There’s money to back it and it is technically feasible. So even though Åland may take a while before it makes the transition, there is no doubt that several geographies around the world will move towards the 100% renewable energy mark as RE technologies, batteries and synthetic fuels become more affordable.