Ensuring sufficient dispatchable capacity for the future energy system

As electrification increases and more intermittent renewables are incorporated into the grid, ensuring sufficient dispatchable capacity is front of mind for system operators across Europe.

This urgent issue initiated a candid discussion that took place at Enlit Europe, where panellists answered tough questions about practical strategies to secure system flexibility and dispatchable capacity.

In order to get things underway sooner rather than later, Tilman Bechthold, Vice President of Research and Development at RWE Power AG, suggested technical and lengthy theorising should be avoided.

Said Bechthold: “I think we need a pragmatic approach. It could take years to calculate how much dispatchable generation we need…it’s a moving target and a moving exercise. I wouldn’t put too much intellect into guessing how much we really need.”

How to source dispatchable capacity

The reason why we should avoid wasting time on theories and calculations said Bechthold, is that Europe will experience a 66 – 100% increase in electricity demand between now and 2050.

Meeting this growing demand is an urgent matter, he added, and will require all available technologies, such as; natural gas, nuclear, biomass, hydropower, hydrogen and, power-to-x.

He suggested that one of the key challenges is combining these technologies to make them work sustainably for countries on different decarbonisation paths.

Louis Strydom, Director of Growth & Development: Europe & Africa at Wärtsilä, suggested when it comes to ensuring sufficient flexibility and dispatchable power, it’s less about the specific technology and more about investing in the right technology at the right time.

Said Strydom: “The one challenge we see [is] it’s very convenient to compartmentalise solutions or technologies [but] it all forms part of an integrated grid. You will have one or two-star performer technologies in specific jobs to be done that give you the dispatchable system but at the same time you will have more general technologies that need to do a multiple job stack to give you dispatchable power.”

Strydom stressed the importance of making the right choices at a portfolio level. “Technologies are easy, but it’s tricky at a portfolio level…”

Charlotte Johnson, Director of Markets of Kraken, steered the conversation away from technology towards the critical role of consumer flexibility in the quest for dispatchable capacity.

Said Johnson: “The bit that no one wants to talk about is consumer flexibility…that’s really important when we think about the transition because to get to net zero…you really need dispatchable capacity thats low carbon and that’s going to have to include the consumer. The consumer is going to have to be engaged with this.”

“The customer needs to be at the heart of change,” she said, adding that many customers dislike their utilities and need to be engaged with a value proposition that they can trust and understand.

The role of the capacity market

Of course, panellists weighed the role of existing capacity markets in ensuring capacity.

Bechthold summarised the general sentiment by stating: “The capacity market is not perfect but it’s the best solution I can see at the moment.”

While panellists acknowledged the important role of the capacity market, they suggested tweaks were needed and that incentives for real flexibility are currently lacking.

Strydom emphasised the need to ensure you have the right amount of dispatchable generation while avoiding overspending, and to achieve this he said, he recommended dispatching in at least five minute intervals or less.

“One of the most important things is…that our settlement windows need to get smaller…when those settlement windows become smaller you can actually see which technologies provide the best value.

“It is a question of how much dispatchable [power] you need but if you haven’t got the right metric for it, if your renewable is dispatching at minute intervals but you’re settling at 15-minute intervals, you have conflict and challenges in the system, you can’t bring in enough competition, you have more price volatiliy.”

Johnson suggested that markets are still too geared for fossil fuel generators and rewarding thermal assets. “There’s no signal in the market to encourage system operators or exchanges to procure low carbon assets.”

Johnson agreed that more granular settlement periods would be helpful, as well as ensuring an element of location in pricing. “In the UK you have a national price system, which means no matter where you are in the country, everyone receives the same wholesale price.

“That means that 40% of wind generation comes from Scotland, 10% of the country’s demand comes from Scotland… theres no incentive for people to generate at the right time or consume at the right time.

“Last year we spent over 1 billion pounds rebalancing wind and gas from the north and south,” and thats not just a UK problem, she added.

Johnson suggests implementing a mechanism like the Italian Maxi scheme, a battery subsidy which incentivises capacity in different areas of the grid and ensures assets are located where the demand is greatest.

And while the capacity market rewards generation and storage, in the UK, for example, there is no carbon signal within the market, a system flaw that needs to be amended.

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Managing consumer assets

Outside of market design, panellists agreed that effectively managing consumer assets would be critical in the quest for system flexibility.

Johnson explained that in early October, the UK had its first capacity market warning in two years. In order to stop it from becoming an event, National grid had to unwind interconnector trades from Denmark, the Netherlands and France.

“They paid over 1000 pounds per MWh to unwind these interconnectors, but we’ve proven already in the market last winter that you could activate consumer flexibility for between 400-700 pounds per MWh. So if they had actually activated consumer flexibility on that Monday it would have been a lot cheaper than unwinding those interconnecter trades.”

“I think there’s a real value for all forms of flexibility and as a system operator or grid operator or market, you should just be picking the cheapest.”

Paweł Wróbel, Director at Polish Electricity Association PKEE, emphasised the impact of a rapidly evolving market and the importance for correct market signals.

Said Wróbel: “We need to predict what is really hard to predict – factors regarding the evolution of the market, which in our opinion is the most important for shaping new investments and delivering our commitment to decarbonise the power system in Poland. We need to…guarantee how to secure supplies in the most efficient way and at an affordable price for consumers…”

Originally published on Enlit Europe.