“Power System Flexibility is Key to Electricity Security” - IEA

Electricity systems across the globe face security and affordability obstacles. Usually, these two challenges stem from rising electricity demand by users, instability of energy sources, and varying shares of renewable energy sources (RES). If not properly managed, these factors can impair our electricity security.

What is electricity security? An electricity system is secure if it can remain stable enough to meet consumers’ electricity demands at affordable rates. In the 2022 World Energy Outlook report, the International Energy Agency (IEA) has proposed a key strategy - power system flexibility to maintain electricity stability and ensure security.

It is worth noting that this proposition by IEA is based on three distinct outlook scenarios:

1. Stated Policies Scenario (STEPS) - considers only the current policies and creates a viable path that reflects them.
2. Annual Pledges Scenario (APS) - creates a trajectory based on the assumption that all abiding targets and pledges relating to energy and emissions are punctually met in full.
3. Net Zero Emission Scenario (NZE) - lays out a practical and cost-effective trajectory that enables the global achievement of net zero emissions by 2050.

Why is There a Need For Power System Flexibility?

Power system flexibility is the capacity of a power system to manage the unpredictability and instability of electricity demand and supply across multiple timescales using cost-effective means. The deployment of flexibility can be used to combat the following specific challenges:

Increasing Energy Prices

In the first half of 2022, the wholesale electricity prices in the EU averaged €200 per MWh—a tripling of the average price in the first half of 2021. This increase would go on to affect retail electricity prices in the first half of 2022—which were about 30% higher than the prices in the first half of 2021.

These shifts are tied to the Russian-Ukraine crisis, higher fossil fuel prices, CO2 prices, and the reduction in nuclear power and hydropower availability, with fossil fuel prices bearing 70% of the responsibility.

How could this have been prevented? By deploying high-value renewables and, consequently, power system flexibility. According to IEA, reducing demand by 10% and demand during peak hours by a minimum of 5% could have saved the EU €30 billion in the first half of 2022.

Furthermore, wind and solar PV jointly provided 23% of the EU’s electricity supply in the first half of 2022. In the cumulative hours when the two supplied a minimum of 40% of the energy generation, the wholesale price dropped 15% below the average. Therefore, the EU could have saved an estimated €40 billion cost of electricity supply in the first half of 2022 if at least 40% of electricity generation had come from renewables.

Increasing Electricity Demand

Using the demands in 2010 and 2021 in the EU—2,574 TWh and 2,608 TWh, respectively—as base values, the following represent expected demands in the EU in 2030 and 2050 using the STEPS and APS:

1. STEPS—2,922 TWh in 2030 and 3,327 in 2050.
2. APS—3,271 in 2030 and 4,384 in 2050. 

According to IEA, these increments are driven by the projected deployment of residential and industrial heat pumps, alongside a major uptake in electric vehicles (EVs), to expand the EU fleet to about 39 million by 2030.

The predicted uptake of EVs certainly poses a threat to electricity security. Between 2021 and 2050, global electricity demand leaps by 80% in the STEPS, 120% in the APS, and 150% in the NZE scenario, with the transport section earning the number three spot. 

What if, however, there were a way to optimise this expected EV volume for power system flexibility? Smart charging.

With the immense adoption of EVs across Europe, smart charging is increasingly becoming the number one go-to for demand-side flexibility (DSF). It allows and helps the EV owner optimise cost and supply from the grid by adjusting the EV charging hours to accommodate other flexible assets and consequently lower overall demand. V2G, a variant of smart charging, allows for a two-way flow of electricity between EVs and the grid.

Sources of Power System Flexibility

Flexibility needs are factors that enable flexibility in a power system. These factors include technologies and management strategies that are flexibility-friendly, a healthy market that enables monetisation of flexibility for energy players, and regulatory frameworks that grant all these.

A major propeller of these flexibility needs is the share of variable renewables in the total power mix. In the EU, flexibility requirements increase significantly as the variable renewables rise to 50%. According to IEA, by 2030, the share of variable renewables will increase to 50%, which means the need for flexibility in the EU will be crucial towards 2030. The following are sources of power system flexibility:

Thermal Power Plants: Today, thermal power plants provide around two-thirds of the flexibility needed to ensure electricity security. However, according to IEA, as we advance towards 2050, there will be a shift in proportions.

By 2050, the share of thermal power plants will drop to around a third in the STEPS and a quarter in APS. 

Power Grids: Power grids contribute to flexibility by being the decentralised hub of interconnections among various sources of flexibility. By being so, they can subside demand for flexibility from some sources when required and increase demand from other sources to maintain balance.

In the EU, about 7 million km of grid lines are expected to have been added to the existing ones by 2050. This value represents about a third of the global grid lines.

Demand-Side Response: Owning demand-side flexible assets such as EVs, home appliances like washers, heaters, air conditioners etc., enables and quickens load shifting from one source to another. This, in essence, makes consumers active participants in power system flexibility.

According to IEA, in both the STEPS and APS, the demand-side response will provide roughly a quarter of power system flexibility in 2050.

Energy Storage: Battery energy storage will become the fastest-growing power system flexibility source by 2050, according to IEA.

The following battery storage capacity trends are projected for both the STEPS and APS in the EU:

• STEPS - less than 40% in 2021, a little above 60% in 2030, and slightly below 80% in 2050.
• APS - around 45% in 2021, 68% in 2030, and 84% in 2050.

Wrapping Up

Electricity demand is expected to skyrocket between now and 2050. Unfortunately, with increased demand comes a surge in energy prices—both of which can harm electricity security.

A major contributor to this is the uptake of flexible assets such as EVs. While this may appear like an insurmountable challenge, it is not. An efficient flexibility orchestration solution like FLEXO can optimise energy consumption for EVs, energy communities, homes and industries to save money for consumers, fleet managers, automakers, DSOs, and ESCos, thereby creating a future of energy security.

Book a slot with our team to understand how Hive Power FLEXO solutions can power your demand side flexibility projects.