“The Loudest Voices” in Power System Transition

Introduction:

As was seen in the three earlier WattWatch Trilemma analysis, for US, Europa and Transatlantic, there is one country/state per each continent that have expressed an extraordinary ambition in it’s Power System Transition towards Renewable Energy, Germany and California.

Why are those two markets then important? For once, Germany is one of the biggest power markets in Europe, what happens here influences everyone around. The same basically goes for California in the west part of the US, being interconnected with the surrounding states, importing some hours up to 50% of its consumption, with that having effects on power markets all the way up to Washington state.  Secondly, their transitions are followed, and by some worshiped, when not really scoring that high on any of the Trilemma parameters. After what happened in California in August 2020, and looking towards Germany closing of baseload nuclear, lignite and coal in the years to come, you could on the contrary question if they might not actually jeopardize their own, and others Security of Supply going forward. For Germany, and Europe, maybe even jeopardizing the continents longer term competitiveness vs Asia, if not taking a technology neutral approach in for example the Taxonomy to be decided on shortly.

Since the Power Year 2020 just closed, it could be interesting to sum up their performances this far, how they score on the two measured Trilemma parameters, as well as comparing some earlier modelling on what System costs would occur going towards ever increasing volumes of Renewable Energy. A 2016 report from Brick & Thernstrom will be the starting point there.

The 2020 number are still preliminary, for California even not yet complete, with November and December numbers estimated but some conclusions can still be made. On Sustainability Germany decreases it’s CO2 content in their generation mix with 49% over the 30 years, California decreases with 29%. These numbers are not bad, there are no 2020 comparison with other markets yet, but the 2019 numbers did not stick out in comparison, Germany then at 43%, California at 36%. For Germany it is clear that the first half year was effected by Covid-19, there are comments in media that they reach their CO2 targets due to this, which could be an explanation in the downtick of the 2020 number. For California the estimated grid mix is even up vs 2019, this preliminary due to higher gas generation and less hydro. Further analysis will follow when final numbers are published. When it comes to costs, as earlier commented in the individual analysis’s Germany have the highest Residential rates in Europe, California is among the highest rates in the US.  Compared with the leaders in CO2 reduction, on levels well above 50% CO2 reduction, it is clear that Affordability among those leaders, such as Tennessee, Iowa and Oklahoma, in the US, and the UK in Europe, are significantly better than Germany and California.

“CLOSING THE GERMAN 2020 EEG BOOKS”

A few bullets on outcome for Germany’s EEG 2020.

·         Renewable Energy share ends up at 46%, up from 42% 2019

·         Negative priced hour at 300h, up from 211 h 2019, a 42 % increase

·         EEG cost should have been revised by 30% from €68/MWh to €90/MWh due to depleted EEG fund but the government settled it with tax money instead.

·         Grid expansion cost are going from originally estimated at 20 B€ to 45B€ to 90B€, no end in sight yet

·         Lack of  30-60GW of RE as well as Firm backup capacity, as can be seen in the Agora graph below, when planned dispatchable generation capacity is closed.

·         Latest RE tenders at €59/MWh for Onshore wind and €51/MWh for Solar, far from the widely spread “best location” prices referenced in media at $20-30/MWh.

“CLOSING THE 2020 CALIFORNIA BOOKS”

The major event in California during 2020 must be the rolling blackouts during August. There are several reports and analysis published, but as in every market, in the end it boils down to the installed firm capacity and max load required

The second story on California is about how is the mix really going to change towards 2030 and 2050? If we take one of the more critical days from the August events, there was a Day ahead forecast for August 18:th at 50 GW of Load

The actual Supply profile for August 18:th can be seen below.  Solar was due to weather reason, mist etc, not reaching it full capacity, import was flexed to it’s max, but also in surrounding states the heat was intense. So gas was basically maxed out.

Looking at this supply profile, together with the actual dynamics “of the west”, designing a 100% RE system is not that easy. People can nourish high hopes in batteries and hydrogen, gas and import have balanced California for 30 years and will probably do that for many years more. If reducing CO2 is the key objective, as will be seen in the Brick & Thernstrom analysis, there are other, and more cost effective ways to reduce CO2, then to maximize RE share.

Background on work from Brick & Thernstrom and 2020 comparison with actual data:

In the report “Renewables and de-carbonization; Studies of California, Wisconsin and Germany”, https://www.sciencedirect.com/science/article/pii/S1040619016300136 , from 2016 Brick & Thernstrom are modelling and calculating System costs for three different power markets, two with very high ambitions for their Renewable Energy (RE) transition.

WattWatch have through its earlier Trliemma analysis captured and compared two of the Trilemma parameters, Sustainability and Affordability. It seems logical to check back what System costs Brick & Thernstrom (B&T) came up with through their models, and what different customer types pay in those markets as of today, and at what Renewable Energy levels. There are differences between System cost and Customer price, but this study will just put some initial focus on how modelled cost correlates with reality. Then there could be a discussion on definitions etc with taxes, fees and grid costs, and how they correlate with System costs.

First a short recap on the work done earlier mentioned above by B&T. Here is a quote from the report referring to the slow and sometimes confusing US Energy policy framework and landscape (were the same, even more so, could be said on the European situation):

“A prime example of this confusion is a body of studies arguing that the GHG reduction burden can be met solely or mainly by renewable energy alone (Jacobson and Delucci, 2009; Kombikraftwerk2; Chandler et al., 2014). In seeking to demonstrate that renewables can by themselves replace all fossil fuels and nuclear energy, these studies run the risk of treating renewables as a societal end in itself, instead of just one among a suite of technologies that could be used to achieve the combined goals of environmental protection, cost-containment, and electric system reliability. In most of these studies, wind and solar power (mostly solar photovoltaic, or PV) dominate the resource mix in the future. So, it is important to ask: What do systems that are highly reliant on intermittent renewable resources (IR), such as wind and solar, look like? How do they compare to other possible system configurations in terms of cost, size, and carbon emissions? We report here on the results of three studies we have done that examine these questions. We will highlight our most important findings and then discuss their policy implications.”

What Brick and Thernstrom basically have done is to model and calculate what different shares of RE would give as System costs and CO2 reduction, based on the year 2016 for the three chosen states/markets.  The assumptions and results made can be seen in table 1,2&3, in the appendix of this report or in the original report. There is one Default case for each market like a base case, then a 50% RE case, a 80% RE case, there is a Balanced case (technology neutral) and a RE case meeting the balanced case in terms of CO2 reduction.  

For Germany, Brick&Thernstrom estimated the 2016 default system at 67GW (slightly lower than the 2020 Max Load of 71 GW. Total installed capacity in 2020 was around 230 GW, so Germany are “well on their way” to the B&T modelled RPS154)
The following predicted scenarios were made

·         RPS50 at 150 GW with a system cost of 126 $/MWh

·         RPS80 at 233GW with a system cost of 194$/MWh

·         Balanced scenario at 79GW with a system cost of 84$/MWh

·         RPS154, to go to 154% of RPS (Renewable Portfolio Standard) at 437 GW with a system cost of 377$/MWh

2020 Industrial prices in Germany comes out at $150/MWh, Residential at $350/MWh, for simplicity and sake of argument, let’s assume 50% Residential volumes and 50% Industrial/rest gives an average cost of $250/MWh at a RE share of 46%.

For the RPS50 case, with 50% RE, B&T estimated a system size at 150 GW and a System price at $126/MWh, vs 2020 at 230 GW and a price of $250/MWh. So with 46% RE, Germans pay more than twice the B&T’s modelled costs. One explanation is off course taxes, grids etc, which could be broken out in a next step, but still, the price a customer pay for the product, should basically mirror the costs over time.

To reach RPS80, prices will then be probably even higher then modelled, not to mention a RPS154. The actual German price levels, still ever increasing, support B&T’s models, even if they come out short on the level.

The cost of reduced CO2 per ton vary between $207/ton CO2 in the Balanced case to $877/ton in the RPS154 case.

For California Brick & Thernstrom estimated a 2016 default system at 54GW (very close to actual day ahead forecasted  2020 August Max Load at 50 GW) and with a System cost of $52/MWh (very far from 2020 actual costs, to be seen below)
The following predicted scenarios were made

·         RPS50, with 50% RE at 90 GW with a system cost of 96$/MWh

·         RPS80, with 80% RE at 123GW with a system cost of 140$/MWh

·         A Balanced scenario at 64GW with a system cost of 93$/MWh

·         RPS195, so a 195% of RPS to reach CO2 reduction similar to the Balanced scenario, at 251 GW with a system cost of 324$/MWh

2020 Industrial prices in California comes out at $146/MWh, Residential at $204 /MWh, as was done for Germany, let’s assume 50% Residential volumes and 50% Industrial  gives an average cost of $175/MWh at a RE share of 33%.

On CO2 reduction, the RPS50 coincidently also gives a 50% reduction, the 80% gives 70% reduction, the balanced and RE to Balanced both give 87% CO2 reduction. Cost of reduced CO2/ton varies from $150/ton in the balanced up to $775/ton in the RE to Balanced.

The conclusion is that the California transformation is more expensive then even modelled. If Californians are to reach a CO2 reduction in line with the balanced case, at 87% reduction, without a balanced mix but pure RE sources, the estimated .$324/MWh might even be at risk. 

Discussion on B&T and WattWatch analysis:

The made simplifications to take rates and compare with System costs are off coarse wrong. But it should be relatively easy to sort out taxes, grid fees and other charges, and with a uniform definition of System costs, take this discussion much further. But as a “first shot” we leave it as it is, to see if it will gather any interest

Overall summery is that B&T and reality have showed that transitioning towards high amounts of RE is expensive. Balancing resources, as was discussed in all three Trilemma analysis, will be crucial for success and System Costs will be the lead theme driving towards an optimal path.  The two Loudest Voices have a long way to go, then we have not even talked about tweaked market models. Next for WattWatch is to look deeper into the two successful Trilemma paths “Expanding Nuclear” and “Expanding Wind”. Tbc

Appendix: Key Data Brick &Thernstrom 2016: