This is an extract from a recent report “Making clean power flexy” by EMBER.
Clean flexibility will unlock system-wide decarbonisation as more wind and solar is deployed across the EU. As renewables grow rapidly in the EU, system flexibility needs are increasing. Flexibility is needed to balance the grid when weather dependent generation, such as wind and solar, exceeds or falls short of the amount of power being used. Making sure that flexibility is supplied by clean sources, rather than fossil fuels, is an essential part of keeping decarbonisation on track for EU targets. Two clean sources in particular are often overlooked: battery storage and demand side flexibility. These are ready to deliver now and have the potential to make a significant difference to a clean power system, both immediately and longer term.
The EU has succeeded in deploying a lot of renewables quickly, hitting a major milestone last year as wind overtook gas generation. However, wind and solar deployment is only one part of shifting the EU’s power system and economy away from fossil fuels. The signs of insufficient flexibility are already appearing. Negative prices and high curtailment of peak summer solar power in certain EU countries discourage further investment in solar power. It is now crucial that clean flexibility becomes a priority, including urgently scaling up battery storage, demand side flexibility and cross-border interconnection, as well as better incorporating clean flexibility into future system planning.
What is clean flexibility?
Wind and solar are becoming the backbone of Europe’s power system. Storage, demand side flexibility and grid enhancements are crucial to put that renewable power to use. Increased levels of wind and solar in the power mix bring cost, climate and energy security benefits. However, other parts of the system that can complement wind and solar are needed to deliver those advantages. This is where clean flexibility comes in. Within a power system, there are many sources of supply and demand which must be constantly matched to ensure the stability of the grid and reliable power supply.
Balancing across time scales
In a highly renewable system, flexibility is required at different time scales to account for changes in weather and power use. As more power is supplied by solar, it will need hourly and daily back-up for when it is less sunny. Low wind periods are more likely to happen across days or weeks, requiring flexibility of the same scale to match. On the other hand the system needs to be able to accommodate times when it is very sunny or windy, and renewable generation is higher than demand. These peaks can overload the grid if that power is not locally consumed or stored.
A new mode of a flexibility for a new system
Europe’s power system is evolving. Historically, grid operators have balanced power demand and supply by using fossil fuel plants that could quickly be ramped up or down depending on need, known as ‘peakers’. This was coupled with solutions such as electricity imports and exports, pumped hydro storage and dispatchable hydropower.
However, this is set to change. Fossil fuels are already playing a diminishing role in the EU’s power system. As this trend continues, a new version of flexibility will be needed to make the transition to a clean system. Solutions such as battery storage and demand side flexibility (DSF) are emerging and offer increasing potential to replace fossil flexibility in the coming years.
In the electricity grid, demand and supply need to match at any time to avoid blackouts. Clean flexibility is a suite of solutions that balance the grid when weather-dependent generation, such as wind and solar, either exceeds or falls short of electricity demand. Flexibility ensures that excess clean power is not wasted, but rather harnessed for later use, moved to where it is needed or matched with consumption. These solutions already offer an alternative to fossil power, which has been historically used to balance the grid.
Clean flexibility Toolkit
Grids: Grids are the enabling factor of a clean power system, connecting electricity to where it is needed. They are already a key provider of flexibility, but their role is set to grow. Interconnectors between countries allow electricity to move across borders in a matter of minutes, balancing geographic variations in wind and solar generation between countries. Interconnections play a central role in providing flexibility: at the EU level they could cover 15% of the daily and 33% of the monthly flexibility needs by 2030. Within a country’s borders, transmission and distribution grids also ensure renewable generation is integrated and delivered to where it is needed most. Focus on smart grids is also growing, increasing the use of data and software in power networks to better match supply and demand in real time.
Storage: While grids shift electricity across geographies, storage shifts electricity across time. Storage technologies accumulate the electricity produced at times of high wind or solar production and shift it to when it is needed the most. While various storage technologies exist, lithium-ion batteries and pumped hydro storage are currently the most widely deployed technologies in the EU. These account for virtually all (>95%) operating storage capacity in the EU in 2022. Lithium-ion batteries can be deployed at grid-scale, connected to the transmission grid, or at smaller scale in a residential or commercial building to enhance consumption of energy produced on site. The costs of batteries are rapidly declining, and lithium-ion batteries have become increasingly cost competitive thanks to a significant drop in raw material costs. Battery costs are expected to drop even further as industrial capacity for their mass production is built up, and also as electric vehicle manufacturing hits another increase in scale.
Demand side flexibility: The key source of clean flexibility acts on consumption patterns. DSF is created by consumers shifting their non-critical electricity use according to external signals, such as periods of low power prices. DSF can materialise in different ways. Historically, the majority was procured using peak shaving, typically through large industrial users. This method manages short-term demand spikes by reducing consumption in a controlled manner, such as shutting off non-essential industrial processes. However, as more renewables come online and create times of low prices, the focus of DSF has moved to demand shifting: moving demand from times of high to low prices.
Developing technologies: Countries are also considering other low carbon forms of flexibility alongside this core toolkit, especially for mid- to long-duration flexibility needs. Pumped hydro storage and interconnection can contribute to longer duration flexibility needs and are already embedded in the wider system, both technologically and in terms of regulation and policy. Flexible operation of electrolysers can use surplus renewable generation for the production of green hydrogen. Since hydrogen can be stored for long periods, it can act as a source of flexibility on longer time scales in combination with hydrogen-based power generation, although this technology is still in the nascent stages of development. Fossil gas power stations equipped with CCS are also potential sources of flexible low carbon power, although can only be employed at times of low renewable generation given they cannot store electricity.
Putting the toolkit into action: Achieving climate targets and mitigating system costs will need all the tools in the clean flexibility kit. In particular, battery storage and DSF are key for providing daily flexibility, which is where the largest increase in system flexibility needs will come from as variable wind and solar continue to grow. Given their high potential but relative lack of attention from policy makers and energy system planners, the remainder of this report will focus solely on DSF and battery storage.
Need for clean flexibility: Batteries and demand side flexibility, along with cross-border interconnection, are the key to a faster and cheaper energy transition. Europe is in the midst of a paradigm shift away from an inefficient and expensive fossil-based system, to a fluid and nimble one backed by wind and solar. The change to a responsive and clean system promises big benefits: delivering low cost renewable power across Europe, taking advantage of home-grown wind and solar resources, building a secure and distributed power system that is resilient to geopolitical threat and reducing carbon emissions to prevent an escalation of climate impacts. Clean flexibility will be the connective tissue of this new system, with its importance to the future energy system becoming increasingly clear. To deliver the benefits of the transition to wind and solar as quickly and efficiently as possible, batteries and demand side flexibility in particular need investment and clear policy planning now.
Clean flexibility benefits
Reducing fossil reliance: Clean flexibility reduces the need for fossil fuel backup in an electricity system dominated by renewables: the final piece of the puzzle in decarbonising power supply. A rapid phase out of coal and gas power is necessary to achieve the EU’s climate targets. Clean flexibility sources can further help to reduce the hours when expensive fossil technologies such as gas power are used to fill the gap between supply and demand: batteries and demand side flexibility are the new peakers.
Wasting no clean power: As more wind and solar is added, times when the grid cannot manage the excess renewable generation are becoming more common, leading to curtailment – when network operators must restrict the output of renewable generators to avoid overloading the grid.
Reducing bills: Batteries can reduce price volatility and lower system costs at peak times. This is in contrast to continued reliance on fossil power, which exposes consumers to the risk of price spikes.
Reducing emissions: Clean flexibility also reduces system-wide carbon emissions. Batteries could displace up to 2 gigatonnes of greenhouse gas emissions per year by 2030 from the global power sector, equivalent to half of the EU’s total CO2 emissions in 2022.
Operating the grid efficiently: Storage and DSF can help existing infrastructure go further, addressing pressure points that might otherwise require more investment. In Germany, some large batteries are already officially labelled as “grid boosters”, allowing better use of existing power lines.
Increasing solar’s value: Storage solutions help alleviate instances of low capture rates and low revenues for solar generators. During times of high solar generation they take up excess electricity, reducing the volume flooding the grid during low price periods. By releasing this stored energy strategically, it gives solar power plants more control over the price they command for their power, and helps them avoid selling for low prices in the middle of the day.
EU flexibility needs could double by 2030
EU power system flexibility needs could double by 2030, with rapid deployment required to keep pace with the growth of renewables and electrification. The need for daily flexibility in particular is expected to grow rapidly in the next six years, underlining the importance of on-the-ground deployment of battery storage and DSF in the very near term. The rise in flexibility needs is tied to increasing ambition in wind and solar. Based on the updated draft National Energy and Climate Plans (NECPs) and other national announcements, Ember estimates that renewables are on course to generate 66% of EU electricity by 2030, with eight Member States expected to exceed 80% renewables generation. In 2023, renewables accounted for 44% of EU electricity generation, with wind and solar alone responsible for 27%.
Batteries and DSF are already deployed in the EU. Batteries have seen recent rapid growth, driven by a few key countries. DSF remains an under-utilised option, often held back by regulation. For both technologies, open and readily available data to track their development is lacking. While pumped hydro storage has historically made up most of EU storage capacity, with 40 GW currently installed, battery growth means this status quo is about to change.
Installed battery capacity doubled to 16 GW in the EU in 2023. Currently, this capacity is concentrated in a small number of countries. More than 70% of EU grid-scale batteries are found in France, Ireland and Germany, whilst Italy and Germany account for the majority of behind-the-meter batteries. Other countries must now follow, particularly those where a high penetration of renewables, such as Spain and the Netherlands, is already causing problems with price cannibalisation and curtailment.
DSF remains underutilised but attention is growing
The current contribution to system flexibility from DSF remains low. In many countries, DSF faces significant barriers to entry under regulatory and market conditions designed for large fossil fuel power plants rather than smaller, distributed sources of flexibility. However, awareness of its potential is growing. Alongside the electricity wholesale market, there are other services such as capacity mechanisms and frequency response services which contribute to the reliable operation of a power system. These are technology neutral in theory but not in practice, meaning participation for demand response and energy storage is often limited.
Data transparency
Cost-effective system planning including clean flexibility will depend on improvements to data transparency. While there are signs of increased implementation of batteries and DSF, data availability is limited and inconsistent. This creates real barriers to a swift and cost-effective energy transition. It is not straightforward to comprehensively assess a country’s flexibility mix or track its evolution over time. More transparency on the current and planned deployment of flexibility sources would enable informed policy decisions, increase stakeholder engagement, build confidence in the technologies and provide up-to-date inputs to power system planning, including grid development plans.
Outlook for clean flexibility in Europe
The key role battery storage will play in providing future flexibility is generally acknowledged, whilst DSF remains overlooked. Explicit 2030 targets for both storage and DSF are lacking in national policy documents and strategies. However, scenarios in energy network plans and industry forecasts suggest that batteries could offer a considerable amount of short term flexibility in 2030. The potential of DSF is still often left unnoticed. Despite the urgent need for a more flexible power system, there is a general lack of projections and targets for storage and DSF deployment in national policy documents.
Eleven draft revised National Energy and Climate Plans (NECPs), out of the 26 submitted, quantify deployment by 2030 for either pumped hydro storage or battery storage, or storage technologies in general. The plans due in June 2024 have an important role as Europe now faces a possible two-year planning gap when it comes to flexibility goal setting.
Demand side flexibility remains neglected
Whilst grid operators seem to be increasingly confident in battery storage, DSF assumptions in ENTSO-E modelling remain generally low. The European Resource Adequacy Assessment 2024 sees 24 GW of explicit market-available DSF in the EU by 2030 coming from 17 Member States, with the other 10 countries having no access to explicit DSF. This capacity does not include volumes secured through capacity mechanisms or participating in other ancillary services.
Policy Recommendations
Clean flexibility is an essential enabler of a clean power system, and it is now its time to shine. While wind and solar are the backbone of the energy transition, they cannot decarbonise the power system alone. To effectively integrate skyrocketing volumes of renewable generation into Europe’s power system, attention must now also turn to clean flexibility. Cross-border interconnection, transmission and distribution grids, storage and demand-side flexibility will all have important roles to play in balancing periods of variable renewable output. Europe needs clear policy direction and the removal of existing regulatory barriers to ensure clean flexibility solutions can be rolled out at the pace needed to match a world of growing electrified demand and rapid wind and solar expansion.
Access the complete report here
