The Southeast European power system in 2030 - ANALYSIS Flexibility challenges and benefits from regional integration
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The Southeast European power system in 2030 Flexibility challenges and benefits from regional integration ANALYSIS Supported by: based on a decision of the German Bundestag
The Southeast Euro- pean power system in 2030 IMPRINT ANALYSIS ACKNOWLEDGMENTS The Southeast European power system in 2030: The analysis “The Southeast European power Flexibility challenges and benefits from regional system in 2030: Flexibility challenges and ben- integration efits from regional integration” was performed within the projects “South East Europe Energy STUDY BY Transition Dialogue" and "Western Balkans REKK Foundation for Regional Policy Cooperation Energy Transition Dialogue". "South East Europe in Energy and Infrastructure Energy Transition Dialogue" is part of the Euro- Mányoki út 14. I.em.4/a | 1118 Budapest | Hungary pean Climate Initiative (EUKI). EUKI is a project financing instrument by the German Federal Min- IN COOPERATION WITH istry for the Environment, Nature Conservation Energy Economics Group (EEG), and Nuclear Safety (BMU). The EUKI competition Institute of Energy Systems and Electric Drives for project ideas is implemented by the Deutsche TU Wien - Technische Universität Wien Gesellschaft für Internationale Zusammenarbeit Gusshausstrasse 25/370-3 | 1040 Vienna | Austria (GIZ) GmbH. It is the overarching goal of the EUKI to foster climate cooperation within the Europe- COMMISSIONED BY an Union (EU) in order to mitigate greenhouse Agora Energiewende gas emissions. "Western Balkans Energy Transi- Anna-Louisa-Karsch-Straße 2 tion Dialogue" is funded by the Austrian Federal 10178 Berlin | Germany Ministry for Sustainability and Tourism (BMNT). PROJECT LEAD The modelling was funded by the European Christian Redl Climate Foundation (ECF). christian.redl@agora-energiewende.de The opinions put forward in this publication are Sonja Risteska the sole responsibility of the author(s) and do sonja.risteska@agora-energiewende.de not necessarily reflect the views of the Federal Ministry for the Environment, Nature Conserva- AUTHORS tion and Nuclear Safety (BMU) and the Austrian László Szabó, András Mezősi, Enikő Kácsor, Federal Ministry of Sustainability and Tourism. Péter Kotek, Adrienn Selei, László Paizs (REKK) Gustav Resch (TU WIEN) Proofreading: WordSolid, Berlin Please quote as: Layout: UKEX GRAPHIC REKK Foundation (2019): The Southeast European Cover image: iStock.com/JoKMedia power system in 2030: Flexibility challenges and benefits from regional integration. 154/03-A-2019/EN Analysis on behalf of Agora Energiewende. Publication: May 2019 / Version 1.2 www.agora-energiewende.de
Preface Dear Reader, have to cope with this variable generation by becom- ing much more flexible. Moreover, in order to ensure Energy systems in Europe are undergoing a funda- security of supply at the lowest possible cost, stronger mental transformation. As fossil fuels are increas- physical integration of power systems and regional ingly phased out, renewables and energy efficiency cooperation will be key. will become the backbones of the new energy system. As early as 2030, 55% of the electricity being gener- To better understand the issues at stake, we have ated in Europe will come from renewables. commissioned experts from REKK to examine poten- tial developments up to 2030 in SEE: What kinds While this transition will help to mitigate global of flexibility requirements arise from the projected warming, it also makes economic sense. The cost of growth of wind and PV? To what extent can further wind power and solar PV has dropped significantly in power market integration within SEE and beyond recent decades, and further cost reductions are antic- help to meet this challenge? And will power systems ipated. Power systems in Southeast Europe (SEE), still possess sufficient reserve margins to guarantee being largely dependent on lignite-fired electricity, security of supply in critical situations? will also undergo dramatic change. By 2030, renewa- I hope you find this study an inspiring and enjoyable bles will be responsible for some 50% of power output read. Your comments are of course welcome. in SEE, with wind and solar accounting for two- thirds of this generation. Yours sincerely, As wind and solar are weather-dependent, their pro- Patrick Graichen duction patterns are variable. Power systems will Executive Director of Agora Energiewende Key findings at a glance: Renewables will provide 50% of SEE power demand in 2030. The European energy transition is underway. By 2030, renewables will account for 55% of power generation in Europe, and 50% of power generation in SEE. 1 Nearly 70% of renewable power in SEE will stem from wind and solar, given the excellent resource potential of these renewables in the region. Cross-border power system integration will minimise flexibility needs. Wind and solar pose challenges for power systems due to their variable generation. But weather patterns differ across countries. For example, wind generation can fluctuate from one hour to the next by up to 47% in Romania, whereas the comparable figure 2 for Europe is just 6%. Moving from national to regional balancing substantially lowers national flexibility needs. Increased cross-border interconnections and regional cooperation are thus essential for integrating higher levels of wind and PV generation. Conventional power plants will need to operate in a flexible manner. For economic reasons, hard coal and lignite will provide less than 25% of SEE power demand by 2030. Accordingly, conventional power plants will need to flexibly mirror renewables generation: When renewables output is high, conventionals produce less, and when 3 renewables output is low, fossil power plants increase production. Flexible operations will become an important aspect of power plant business models. Security of supply in SEE power systems with 50% RES is ensured by a mix of conventional power plants and cross-border cooperation. The available reserve capacity margin in SEE will remain above 35% in 2030. More 4 interconnectors, market integration and regional cooperation will be key factors for maximising national security of supply and minimising power system costs. SEE can be an important player in European power markets by providing flexibility services to CEE in years of high hydro availability. 3
Agora Energiewende | The Southeast European power system in 2030 4
Content Executive Summary 7 The SEE power system in 2030: Renewables as the main generation source 7 Regional integration helps avoid RES curtailment and enables geographical smoothing of vRES 8 Renewables generation and its consequences for conventional power plants 9 Security of supply: Sufficient reserve margins in SEE for a RES-E share of 50% 10 Security of supply: Peak demand can be met in the winter season 12 Security of supply: Sensitivity of varying weather conditions and interconnector capacities 13 Conclusions: Pathways for robust RES deployment and security of supply in SEE 15 Introduction 17 The modelling approach 19 Supply side representation in the model 20 Demand-side representation in the model 20 Transmission grid representation 21 Calibration of the model and input data 21 Yearly electricity mix in SEE 23 The SEE power system in 2030 23 Impact of RES on conventional power plants: Start-ups and utilization rates 24 Transmission grid constraints and RES curtailment 25 Security of supply: Available reserve capacities 28 Security of supply: Assessment of critical weeks 31 Sensitivity analyses: The impacts of different weather regimes and interconnection levels 43 Conclusions: Pathways for robust RES deployment and security of supply 49 References51 ANNEX53 5
Agora Energiewende | The Southeast European power system in 2030 6
ANALYSIS | The Southeast European power system in 2030 Executive Summary This report takes a deeper look at the future of re- The SEE power system in 2030: Renewa- gional market integration for power systems with bles as the main generation source high shares of wind and solar in Southeast Europe (SEE). Because these technologies vary in output In view of the recently adopted EU 2030 targets for depending on the weather, they bring an increased climate and energy, all European power systems need for flexibility services in the power system. are about to embark on a major transition. By 2030, Further integration of European power markets is a an average of 57% of electricity in Europe’s power crucial enabler of flexibility. grids will come from renewable energy sources1. For Southeast Europe (SEE), this means a RES-E share This report assesses in detail the following ques- of 50% in 2030 (see Figure ES 1).2 A factor accelerat- tions: What kinds of flexibility requirements arise from the projected growth of wind and PV in SEE? To 1 See Agora Energiewende (2019): European Energy Tran- what extent can further power market integration sition 2030: The Big Picture. Ten Priorities for the next European Commission to meet the EU’s 2030 targets and within SEE and beyond help meet those require- accelerate towards 2050. ments? Do power systems possess sufficient reserve 2 In line with the overall European energy targets, the margins to guarantee security of supply in critical recent SEERMAP project has demonstrated that the situations? deployment of renewable capacity in the EU SEE and Western Balkans is not only feasible but also has several advantages over fossil fuel-based investment. See http:// rekk.hu/analysis-details/238/south_east_europe_elec- tricity_roadmap_-_seermap for more details. Generation mix in SEE in 2030 Figure ES 1 Nuclear Coal and lignite Gas Hydro Wind Biomass PV Other RES SEERMAP Decarbonization Scenario; REKK (2017) 7
Agora Energiewende | The Southeast European power system in 2030 ing this transition is that roughly 50% of the region’s Regional integration helps avoid RES existing coal and lignite generation capacity will curtailment and enables geographical need replacement by 2030 due to age and noncom- smoothing of vRES pliance with emission standards. Based on our modelling, curtailment will not exceed Solar photovoltaics (PV) and wind power – driven by 500 GWh a year in 2030,3 and it will remain zero in significant cost reductions – will contribute to more the SEE region. The main reasons for the low level than half of the RES-E production in Europe in 2030. of vRES curtailment are the availability of hydro For SEE, wind and PV will contribute some 65% to resources in the region that can satisfy flexibility RES-E generation. Because wind and solar depend needs in the power system, the availability of inter- on weather, future power systems will have funda- connectors offering flexibility potential through im- mentally different generation patterns from those ports and exports and a low correlation between RES observed today, significantly increasing the need for feed-in across borders. flexibility in the non-intermittent part of the power system. Regional cooperation and cross-border We observe a very different cross-country pattern in power system integration offer important ways for- wind generation easing vRES system integration. In ward in meeting future flexibility requirements. 3 This corresponds to 0.014% of European power demand. Time series of onshore wind power generation in a simulation for the first week of 2030 at different levels of aggregation Figure ES 2 60% Actual wind generation/installed capacity [% ] 50% 40% 30% 20% 10% 0% 1 25 49 73 97 121 145 169 Hours RO SEE Europe REKK 8
ANALYSIS | The Southeast European power system in 2030 the SEE region, wind speeds show weak correlation, one hour to the next is 47%, while the European-wide ranging from 11% to 46%.4 These fairly low correla- maximum change is only 6%. tions suggest that wind generation would not peak at the same time within the region; rather, it would be dispersed over time and across the countries in the Renewables generation and its region. It also suggests that the region would follow a consequences for conventional different wind generation pattern from northern Eu- power plants ropean countries, which means that wind production would not peak at the same time in the wider Euro- Both in Europe and in the SEE region, the 2030 sce- pean region (see Figure ES 2).5 For example, in Roma- nario shows a more flexible utilization of power nia the maximum change of wind generation from plants based on an increase in the number of start- ups per unit. This is a consequence of a lower uti- lization of conventional power plants due to the 4 This confirms earlier research testing the correlation increased generation of variable RES and the dete- of wind power feed-in between the countries of the riorating economic performance of coal and lignite Pentalateral Energy Forum (Austrian, Belgium, France, plants. Climbing fossil-fuel costs, carbon prices and Germany, Luxembourg, the Netherlands, Switzerland) where correlation coefficients ranged from 24% (Austria increasing investment costs place fossil-fuel-fired and Belgium) to 66% (Luxembourg and Belgiun). For more plants at the end of the merit order curve, resulting details, see Fraunhofer IWES (2015): The European Power in a lower number of operation hours. This impact is System in 2030: Flexibility Challenges and Integration further amplified by the growing production of ze- Benefits. An Analysis with a Focus on the Pentalateral ro-cost PV and wind generation, which on account Energy Forum Region. Analysis on behalf of Agora Ener- giewende. of the “merit order effect” will supplant more and more fossil fuel plants from the pool of generators. 5 For example, Grams C. et. al. (2017) find that balancing future wind capacity across regions – deploying slightly Even though the number of start-ups will increase, more capacity in the Balkans than at the North Sea, say – by 2030 the total start-up costs as a share of variable would eliminate most wind production output variations, generation costs will only amount to 1% in both the better maintain average generation and increase fleet- EU and in SEE (see Table ES 1). wide minimum output. See Grams et al (2017): Balancing Europe’s Wind-Power output through Spatial Deploy- ment Informed by Weather Regimes. Nature Climate Change. Fossil fuel-based dispatchable power plants and the cost of start-ups in 2017 and 2030. Table ES 1 Number of Total vari- Number Number of Total start-up Start-up costs/ start-ups able costs, of units start-ups costs, m€ total costs per unit m€ 2017 2202 14365 6.5 70636 721 1.02% Europe 2030 1522 13245 8.7 77664 906 1.17% 2017 167 441 2.6 4443 24 0.54% SEE 2030 89 798 9.0 5824 60 1.04% REKK 9
Agora Energiewende | The Southeast European power system in 2030 Utilization rates for different power plant technologies, 2017 and 2030. Table ES 2 SEE Europe 2017 2030 Change 2017 2030 Change Nuclear 84.8% 85.2% 0.3% 79.2% 81.0% 1.7% Natural gas 7.5% 39.9% 32.4% 27.0% 31.2% 4.1% Utilization Hard coal 20.2% 33.8% 13.5% 36.2% 46.1% 9.9% rate Lignite 77.6% 63.3% -14.4% 80.4% 68.4% -12.0% HFO 0.1% 1.3% 1.2% 4.5% 0.9% -3.7% LFO 0.0% 0.0% 0.0% 7.3% 0.5% -6.8% REKK At the same time, the utilization rates of the differ- Security of supply: Sufficient reserve ent types of power plants will have changed signif- margins in SEE for a RES-E share of 50% icantly by 2030, with the utilization of natural gas plants climbing to 40% from 7.5% in 2017 and the The amount of available upward reserve capaci- utilization of hard coal-fired plants growing from ties in 2030, though lower than in 2017, will not fall 20% to 34% in the SEE region. The utilization of lig- below 5 GW in 2030 (12% of the regional peak load). nite-fuelled plants is projected to fall in Europe and These reserve capacities can step in if demand un- in the SEE region, down from 81% to around 68%, expectedly rises in real-time or if generation unex- due to deteriorating economic performance and re- pectedly drops in real-time (e.g. due to a power plant duced operating hours (see Table ES 2). outage or lower than forecasted RES generation). In the vast majority of hours, upward reserve ca- The most important change between 2017 and 2030 pacities will not drop below 20 GW in 2030. Gen- is that more and more power plants will be operated in eral evaluation criteria indicate that a minimum of “peak load” mode: natural gas power plants with low 5–10% of consumption is needed for upward reserve yearly average utilization rates and a high number of capacity to guarantee security of supply. By these start-ups (up to 35 times/year). For comparison, the lights, the SEE region will have a sufficient level of highest number of modelled start-ups for a given unit supply security in 2030. in 2017 was less than 20 in SEE. By 2030 more than half of the gas-fired units will actively participate in the intraday and balancing markets. The utiliza- tion structure of coal-, lignite- and HFO-LFO-fuelled plants will change similarly by 2030 – increasingly operating in a “flexibility services mode”. This con- firms their changing role and utilisation pattern in the future electricity system: they will provide more system balancing and flexibility services and receive more of their income from short-term power markets instead of from baseload energy sold on the futures and day-ahead markets (see Figure ES 3). 10
ANALYSIS | The Southeast European power system in 2030 Yearly average utilization rates and number of start-ups (per year) on a unit level in the SEE region in 2017 (above) and 2030 (below) Figure ES 3 40 Gas 35 Nuclear Coal and lignite 30 HFO/LFO Number of start-ups in a year 25 20 15 10 5 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yearly utilization rate [%] 40 35 30 Number of start-ups in a year 25 20 15 10 5 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yearly utilization rate [%] REKK 11
Agora Energiewende | The Southeast European power system in 2030 Total available upward reserve in the SEE region, in all hours of 2017 and 2030 Figure ES 4 40,000 35,000 30,000 25,000 Capacity [MW] 20,000 15,000 10,000 5,000 0 1 8,760 Hours 2017 2030 REKK The total available downward reserve capacity for availability of sufficient interconnection capacity all hours of the year will increase by 2030, mostly between countries. Increasing interconnection lev- because of the deployment of RES and natural gas els between the countries can eliminate the missing plants, both of which provide downward regulation. production hours entirely, because countries with The minimum downward reserve capacity will be this problem can rely on imported electricity from ca. 11 GW in 2030 (27% of the regional peak load). neighbouring power systems. The number of hours with missing production will be very low in 2030. The scenario showed hours Security of supply: Peak demand can be with missing production in Albania, Kosovo and met in the winter season North Macedonia. The missing production levels occur in one or two hours of the year, which indicate To illustrate the daily operations of the 2030 power very low levels of load-shedding requirements. The system in SEE, we describe a week in winter where typical security of supply standards in the EU range the remaining capacity (defined as the sum of from three to six hours of loss of load expectation. spinning and non-spinning reserve capacity and non-utilized import capacity) is lowest. The results of missing production levels and low cross-border correlation of vRES feed-in empha- Unlike today, the natural gas-based electricity gen- size the importance of regional cooperation and the eration patterns of 2030 will change from peak-load 12
ANALYSIS | The Southeast European power system in 2030 Electricity generation and demand in the SEE region for the critical week in winter in 2030 in MW Figure ES 5 45,000 40,000 35,000 30,000 25,000 Capacity [MW] 20,000 15,000 10,000 5,000 0 -5,000 1 13 25 37 49 61 73 85 97 109 121 133 145 157 Nuclear Other RES Coal and lignite Natural gas Wind HFO/LFO Hydro PV Missing production Pumped storage Consumption Net import REKK following to steadier generation because wind and hours. The higher volatility in production is indi- PV output remains fairly low in the critical week. cated by the steeper “ramp-ups” and “ramp-downs” (Wind and PV generation levels will nearly dou- of the blue area in Figure ES 6. Nonetheless, all elec- ble compared to 2017, however.) Consumption peaks tricity demand will be met in the region (unserved will mostly be managed by increased hydro uti- energy=0 GWh). lization and increased net imports, whose greater potential derives from increasing NTC levels. In the first half of the critical week, net imports will serve Security of supply: Sensitivity of varying as “gap-fillers” while in the second half of the week weather conditions and interconnector they will be utilized on a more constant basis (see capacities Figure ES 5). We analyzed scenarios with average, high and low In 2030, the reserve margin will only occasionally generation from hydro, wind and PV (based on his- reach 100%, while in peak hours it will still be 40– torical data) and a scenario with higher and lower 60%, which represents a sufficient level of reserves. than expected interconnector deployment. Due to the increased use of renewables and inter- mittent generation, production will be more volatile In most weather-related sensitivity cases the num- when compared with 2017, which means that the ber of start-ups increases, with the exception of the need for reserves will be more pronounced in some low hydro and reference PV/wind case, where start- 13
Agora Energiewende | The Southeast European power system in 2030 Reserve margin in the SEE region for the critical week in winter in 2030 in MW Figure ES 6 70,000 200% 180% 60,000 160% 50,000 140% Capacity margin [%] 120% Capacity [MW] 40,000 100% 30,000 80% 20,000 60% 40% 10,000 20% 0 0% 1 13 25 37 49 61 73 85 97 109 121 133 145 157 Total production Total upward reserve Available import Missing production Consumption Reserve margin REKK ups of conventional power plants decrease. The main TYNDP) would reach a satisfactory level in the 2030 reason for this rather unexpected result is that PV reference case. and wind generation patterns and hydro availability (dry or wet year) are not correlated. Consequently, it Figure ES 7 shows the non-satisfied demand for all may happen that in a dry year with low hydro avail- scenarios. Non-satisfied demand amounts to only ability and less volatility, more permanent wind a few gigawatt hours in the reference case and re- conditions will prevail, which would offset overall mains the same in most sensitivity cases. As the system volatility. Hence, low correlation among var- figure illustrates, the most important impact on ious RES generation sources is an important enabler non-satisfied demand arises from altered NTC lev- of vRES system integration. els. With 20% higher NTCs, annual missing produc- tion drops to zero, while more than 240 GWh/year The case with a 20% lower value of NTCs yielded demand is left unsatisfied (corresponding to only more start-ups because countries would have to bal- 0.1% of regional power demand), with 20% lower ance their systems by relying more on power plants NTCs available. Three countries are primarily af- within their borders given their limited access to fected: Albania, Kosovo* and North Macedonia. This import. The higher NTC scenario (20% higher NTCs emphasizes the key role of interconnection capacity than in the reference case) does not decrease the for security of supply. level of start-ups. This means that the planned NTC development in the region (in line with ENTSO-E’s 14
ANALYSIS | The Southeast European power system in 2030 Missing production values (non-satisfied demand) for the sensitivity scenarios in GWh/year Figure ES 7 300 0.120% Total missing production/consumption [%] 250 0.100% 200 0.080% GWh/year 150 0.060% 100 0.040% 50 0.020% 0 0.000% 17 30 V PV V V PV V V V C TC NT _P _P _P P _P _P 20 _N 20 h_ h_ F_ ow EF ow w gh _ gh w RE ig ig lo F _R hi Lo _h _h RE _l _l Hi o_ o_ o_ ro ro ro ro ro dr dr dr yd yd yd yd yd hy hy hy h _h _h h _h F_ _ _ F_ _ w gh w gh w gh RE RE Lo Lo Lo Hi Hi Hi AL BA_FED BA_SRP BG GR HR KO* ME MK RO RS REKK Even though there is enough spare capacity on the ernization or replacement in the next decade, we regional level, the lack of interconnectors in the 20% now have an excellent opportunity to introduce the lower NTC sensitivity case hinders the full use of 50 to 55% share of RES in the region required by the power plants in neighbouring countries, which, in EU’s 2030 targets for climate and energy. Indeed, turn, leads to unserved power demand in Albania, the 2030 SEE scenario assessed in this report finds Kosovo and North Macedonia. This underlines the that RES-E shares of 50% are realistic in terms of importance of interconnection levels in the SEE re- system flexibility, RES integration and security of gion. The planned infrastructure development can supply. The scenario projects that the level of avail- help countries maintain the flexibility and security able upward reserve capacities will decrease rel- of supply of the regional system, though the lack of ative to 2017 because of higher vRES penetration. interconnectors can leave some countries vulnerable The available upward reserve capacity margin will during certain critical hours. still be above 40% in the region during most hours, and only for a few hours per year (under 15 hours) will it fall to 35%. This indicates that a higher level of Conclusions: Pathways for robust RES cross-border capacities within the SEE region would deployment and security of supply in SEE help maintain the system adequacy throughout all hours of the year. Moreover, the available downward With roughly half of the installed hard coal and reserve capacities will increase thanks to vRES po- lignite generation capacity in SEE requiring mod- tential to provide such services. 15
Agora Energiewende | The Southeast European power system in 2030 The results also indicate that the projected infra- and the contribution of fossil-based generation to structure developments of the analysed Decarboni- system flexibility will help avoid zero marginal cost sation Scenario - characterised by major reductions vRES curtailment in 2030. This underlines the eco- of coal- and lignite-based generation and steadily nomic potential of efficient RES integration in the increasing RES generation – will meet the growing region. demand of the region, achieving a nearly balanced net import position at the regional level by 2030. As The sensitivity assessment shows that intercon- coal and lignite production decreases, vRES produc- nections and market integration are key factors for tion and gas-based generation will take their place maximizing the security of supply and providing (though the increase of gas-based generation will be the required flexibility for vRES deployment in the confined to just a few countries in the region). Note SEE region. A limited level of non-satisfied demand that the annual average utilization of gas plants in will occur in Albania, Kosovo* and North Macedonia the region is not projected to exceed 45% in 2030 for due to increased network limitations. This under- our sensitivity cases. Thus, the business model for lines the importance of continuing the implemen- conventional power plant operators is all about flex- tation of cross-border infrastructure developments. ibility, not simply about the sale of kilowatt hours. If More importantly, market integration must be deep- lignite utilization falls below 65%, lignite plants will ened among SEE countries in order to utilize availa- have a hard time earning sufficient revenue from ble cross-border capacities efficiently. This not only the power markets. brings security of supply benefits; it also has an eco- nomic rationale, for it gives the region greater access The critical week assessment shows that the reserve to the electricity markets of neighbouring countries margin in the SEE system will stay above a healthy in Central and Eastern Europe. Most importantly, 35% even during critical hours of the assessed weeks, SEE can provide flexibility services to these coun- which presents a satisfying level for the region en- tries in seasons/years with higher levels of hydro suring security of supply. At the same time, in most availability. hours of the year the region maintains an even higher level of reserves: At over 100% of regional In summary, a diverse mix of flexible generation consumption in many hours, the SEE region will be technologies in SEE (hydro technologies, flexible able to provide flexibility services to neighbouring biomass, natural gas and storage) can facilitate the electricity systems such as those of Hungary and integration of vRES – especially wind and PV. In Slovakia, where flexible units are likely to be scarcer. particular, reduced flexibility needs and increased The analysis has shown that the most critical season system reliability can be achieved by integrating in SEE is autumn, where availability of hydro re- countries and regions with fundamentally differ- sources is limited due to lower water reservoir levels. ent weather regimes. An interconnected European This shows the need to diversify flexibility options power system would be highly beneficial for vRES through geography as well as technology. integration. Indeed, regional cooperation, stronger power systems and market integration will help The number of plant start-ups will also stay in the minimize power system costs for consumers while manageable range – below 40 start-ups a year for maximizing supply security. any conventional unit. By 2030, the system will have many dedicated flexible gas units; several coal and lignite plants will also contribute to the provi- sion of system flexibility. Variable RES curtailment will remain low because hydro-based generation 16
ANALYSIS | The Southeast European power system in 2030 Introduction With the recently adopted EU 2030 targets for cli- This study takes a deeper look into the future of re- mate and energy, European power systems are about gional market integration for power systems with to embark on a major transition. By 2030 an av- high shares of wind and solar in SEE: what kinds erage of 55% of electricity in Europe’s power grids of flexibility requirements arise from the projected must come from renewable energy sources. Now growth of these two technologies? And to what ex- is therefore an auspicious moment for advancing a tent can further power market integration within clean-energy transition in South East Europe (SEE). SEE and beyond help meet that challenge? This study builds on the SEERMAP project, which Countries throughout SEE have high shares of elec- analyzes the region’s energy sector through long- tricity generated by an aging fleet of coal-fired term scenarios. We focus on the project’s “decarbon- power plants. Some of the youngest coal plants in ization scenario”, which assumes 93% decarboni- the Western Balkans were built in 1988, before the zation in the region’s power sector by 2050 (in line break-up of Yugoslavia. Within the next decade, with EU goals) and a RES-E share of 50% in 2030 in utility companies and governments will have to de- the SEE region. The applied REKK’s European Elec- cide whether to modernize or replace roughly 50% tricity Market Model (EPMM) tool captures the in- of the region’s existing coal and lignite generation terplay between supply, demand and storage over an capacity. Indeed, the recent SEERMAP project6 has entire calendar year, i.e. 8760 hours. The scenario demonstrated that deployment of renewable capac- for the energy system in 2030 addresses the follow- ity in the EU SEE and Western Balkans7 is not only ing questions: feasible but also has several advantages over fossil fuel-based investment. →→ Will SEE power demand be met in all hours in 2030? Solar photovoltaics (PV) and wind power – driven →→ Will the SEE power system have a sufficient re- by significant cost reductions – will almost cer- serve margin to guarantee the security of supply tainly contribute to more than half of the RES-E in critical situations? share in Europe in 2030. As wind and solar depend →→ What will be the critical/vulnerable weeks or days on weather, future power systems will be character- in the system? ized by fundamentally different generation patterns →→ Will the system also be robust during extreme from those observed today, significantly increasing weather patterns? (e.g. in years of low precipita- the need for flexibility in the non-intermittent part tion or with lower number of hours of wind). of the power system. In meeting the flexibility chal- lenge, regional cooperation and cross-border power Here are some of the key characteristics of the system integration offer important ways forward. model (its individual features are described in later sections): →→ All hours of a selected year are modelled; 6 See http://rekk.hu/analysis-details/238/south_east_eu- →→ Its optimization takes places on a (rolling) weekly rope_electricity_roadmap_-_seermap basis, with the objective being to minimize sys- 7 In SEE, the EU member states are Bulgaria, Croatia, tem costs. Greece and Romania. The Western Balkans countries are Albania, Bosnia and Herzegovina, Kosovo, North Mace- →→ The hours during the week are interconnected: donia, Montenegro and Serbia. the operation of a power plant in a given hour has 17
Agora Energiewende | The Southeast European power system in 2030 impact on its availability for the next hours. A yearly modelling sequence consists of 52 weekly optimization steps, where the weeks are also con- nected: information on the last hour of operation for the production units in the modelled week is passed on to the next week. →→ Power plants in the model are represented through higher granularity (e.g. start-up costs, start-up time and minimum utilization rates) than in a typical power generation technology modelling characterisation (e.g. fuel type, fuel efficiency, marginal cost); →→ EPMM covers the entire ENTSO-E power system, including EU member states and the contracting parties of the Energy Community. 18
ANALYSIS | The Southeast European power system in 2030 The modelling approach The EPMM is a unit commitment and economic dis- power plants operate and their production levels. The patch model, which during the optimization process model is executed for all weeks and hours (8760) of satisfies electricity demand in the modelled coun- the year. To increase the robustness of the results, the tries at minimum system costs while considering model starts the weekly optimization on Wednes- the different types of costs and capacity constraints days and finishes on Tuesdays, to avoid that the fast- of the available power plants and cross-border est ramp-up period (Monday morning) would be the transmission capacities. starting position of the optimisation. EPMM endoge- nously models 41 electricity markets in 38 countries.8 The model minimizes the production costs for satis- fying demand. These costs include the start-up and The main inputs and outputs of the model are sum- shut-down costs of the power plants, the costs of marized in Figure 1. production (mostly fuel and CO₂ costs) and the costs that occur in case of RES curtailment. 8 In the cases of Bosnia and Herzegovina, Denmark and the Ukraine, two markets/price zones are distinguished per The model simultaneously optimizes all 168 hours of a country; otherwise one market/price zone per country is week and determines the hours of the week in which assumed. Main inputs and outputs of the EPMM model Figure 1 Marginal cost Start-up and Available production shut-down capacities Inputs Cost curves of Country Cross-border power plants consumption capacities Model Outputs Minimum cost Missing Downward and upward Curtailment of Number of of satisfying production capacities available for RES producers start-ups consumption reserve services REKK 19
Agora Energiewende | The Southeast European power system in 2030 The results of the optimization show how elec- Renewable generation – apart from biomass and tricity demand can be satisfied at a minimum cost storage hydropower, is included exogenously as- while yielding the optimal generation mix and the suming zero marginal cost. Generation patterns are required number of power plants start-ups in the based on European weather data from 2006–2011 modelled region. The potential for missing produc- for PV and wind generation and 2008–2017 for hy- tion and the available upward and downward capac- dro. These renewable technologies are non-dis- ities for reserve services are also important outputs patchable but can be curtailed at given costs. of the model. We distinguish between three categories of hydro generation: run of river, pumped storage and reser- Supply side representation in the model voir. The reservoir hydro units can flexibly produce electricity with a maximum aggregate production Power plants are represented at the unit/block level constraint for the entire week. This allows the model for each country and are divided into twelve tech- to capture the flexibility of hydro generation while nologies: biomass, hard coal- and lignite-based, ge- placing a realistic limit on its overall contribution to othermal, heavy and light fuel oil, hydro, wind, PV, weekly and yearly electricity generation. nuclear, natural gas and tide/wave power plants. All generation units have the following inputs: in- Demand-side representation in the stalled capacity, electrical efficiency and self-con- model sumption. The short-run marginal costs of gen- eration are calculated based on country- and Power demand is an exogenous input to the hourly technology-specific fuel prices, variable operational optimization of the power system. Hourly demand costs, taxes and CO₂ emission costs. Start-up costs data is derived from actual data for 2015, which is are also included for dispatchable units (thermal, adjusted in the scenarios proportionally based on nuclear, storage hydropower and pumped storage). the assumed growth of yearly consumption by 2030. The start-up assumptions are summarized in Table 1. Power demand is met by the available power plants Start-up costs and constraints for dispatchable technologies. Table 1 Unit Nuclear Lignite Lignite CCGT Other Gas Small Coal Coal (>500MW) (500MW) (
ANALYSIS | The Southeast European power system in 2030 and the import capacities subject to minimisation of prices are not publicly available for many countries the cost to serve demand. in the EU, which makes it difficult to calibrate natu- ral gas-based production. Transmission grid representation To ensure robust results, various weather regimes are included in the modelling that account for the In the EPMM model, each country represents one variability of renewable energy resources. This re- node, so network constraints inside the countries are quired collaboration with the Vienna University of not considered. Cross-border transmission capaci- Technology (TU Wien), which provided information ties are represented by net transfer capacities (NTCs) on RES production covering the whole ENTSO-E values, which put an upper limit on cross-bor- system, including the SEE region. Data on variable der electricity trading. Power exports and imports, RES production (i.e. solar PV, wind and hydro) and therefore, may not exceed NTC values in any given on dispatchable RES are derived from TU Wien’s hour. Imports and exports take place to minimize Green-X model.9 Historical weather data and pro- system costs and maximize security of supply. jections for future installed capacities were used to generate RES generation patterns on an hourly basis. Calibration of the model and input data More input data and assumptions for the EPMM model can be found in Appendix 1. The information To ensure robust modelling results, the model was includes details about power plant capacities, fuel calibrated to the latest available data (2017). Table prices and available NTC capacities for the modelled 2 illustrates the difference between the calibrated region. model results and actual data for 2017. The differ- ence between the two data sets is well below 6% for the main production technologies. The only excep- 9 For a recent study describing the GREEN-X model, see del Rio et al (2017): A techno-economic analysis of EU tion is gas units, where the difference is 23% due renewable electricity policy pathways in 2030, Energy to the sensitivity of the assumed gas prices. These Policy. Modelled and actual production share by technology in the EU, 2017. Table 2 GWh Total Nuclear Coal and Natural Run-of- Pumped Wind Bio- HFO, PV Other lignite gas river, storage mass LFO RES storage Model 3 597 254 838 381 849 333 613 272 592 601 -5 223 386 419 177 953 12 894 117 391 14 233 Actual 3 680 400 808 100 798 300 757 300 576 700 n.a. 370 300 174 200 29 300 114 600 12 600 Differ- ence, 83 146 -30 281 -51 033 144 028 -15 901 5 223 -16 119 -3 753 16 406 -2 791 -1 633 GWh Differ- 2.3% -3.6% -6.0% 23.5% -2.7% n.a. -4.2% -2.1% 127.2% -2.4% -11.5% ence, % REKK, ENTSO-E (2018) 21
Agora Energiewende | The Southeast European power system in 2030 22
ANALYSIS | The Southeast European power system in 2030 The SEE power system in 2030 Though situations will vary significantly from average performance of the markets/power sys- country to country with regard to domestic resource tems and the robustness of the system in critical availability (hydropower, solar irradiation, wind situations. We conclude with a sensitivity analysis. speed), renewables are expected to be “mainstream” Throughout this report, the term “SEE region” refers by 2030 throughout Europe. The assessed decarbon- to the Western Balkan countries (Albania, Bosnia ization scenario assumes a 2030 RES-E share rela- and Herzegovina, North Macedonia, Kosovo*, Mon- tive to gross consumption of 48%10 in Europe and of tenegro and Serbia) and the EU countries Bulgaria, 50% in SEE. Croatia, Greece and Romania.11 This section looks at this scenario in detail. We start by assessing the aggregated yearly results and then Yearly electricity mix in SEE study potentially critical weeks with tight supply/ demand situations. In this way, we measure both the Figure 2 shows the annual power mix for the SEE region in 2017 and 2030. 10 See also Fraunhofer IWES (2015): The European Power System in 2030: Flexibility Challenges and Integration Benefits. An Analysis with a Focus on the Pentalateral 11 *This designation is without prejudice to positions on Energy Forum Region. Analysis on behalf of Agora Ener- status, and it is in line with UNSCR 1244 and the ICJ giewende. Opinion on the Kosovo declaration of independence. Electricity generation mix of the SEE region, 2017 (actual data) and 2030 (decarbonization scenario) Figure 2 300 250 200 58 139 14 [TWh] 150 8 21 100 7 47 3 13 40 42 50 7 1 4 25 36 0 2017 2030 Nuclear Coal Natural gas Hydro Wind Biomass PV Geothermal and other RES Lignite Consumption REKK 23
Agora Energiewende | The Southeast European power system in 2030 The most important change for the region is the eration and a smaller increase in RES generation. sharply falling share of coal- and lignite-based gen- Meanwhile, the net export positions of Greece and eration. Compared with 2017, less than half of the Romania will increase because the decreasing coal- production from these fuels will remain in the sys- and lignite-based generation will be more than com- tem by 2030. The reduction will be compensated by pensated by natural gas and RES-based generation. an increase in RES generation of 20 TWh, in natu- ral gas-based production (25 TWh) and in nuclear generation (11 TWh). The region will move from a Impact of RES on conventional power net export to a net import position, but the yearly net plants: Start-ups and utilization rates import ratio will remain relatively small – 6.8%. The capacity mix changes significantly in the decar- Both in Europe and in the SEE region, the 2030 sce- bonization scenario, with a shift away from fos- nario shows a more flexible utilization of power sil-based capacity towards renewable capacity. The plants based on an increase in the number of start- changes are driven primarily by rising carbon prices ups per unit. This is a consequence of a lower uti- in EU countries and decreasing renewable technol- lization of conventional power plants due to the ogy costs. Although the Western Balkan countries increased generation of variable RES and the dete- are assumed to have carbon prices only from 2030, riorating economic performance of coal and lignite in the scenario only 1500 MW new fossil based plants. Climbing fossil-fuel costs, carbon prices and generation is installed in the SEE region, due to the increasing investment costs place fossil-fuel-fired assumed economic environment: increasing carbon plants at the end of the merit order curve, resulting prices elsewhere, rising coal and natural gas prices in a lower number of operation hours. This impact is and deteriorating utilization rates of fossil gener- further amplified by the growing production of ze- ation. Over the long-term, lignite- and coal-based ro-cost PV and wind generation, which on account generation will not be able to reach the required of the “merit order effect” will supplant more and utilization levels needed to cover the increasing in- more fossil fuel plants from the pool of generators. vestment costs and meet the higher emission stand- Even though the number of start-ups will increase, ards set by new European legislation. by 2030 the total start-up costs as a share of variable On a country-level, Bosnia and Herzegovina, Bul- generation costs will only amount to 1% in both the garia, Kosovo*, North Macedonia, Montenegro and EU and in SEE (see Table 3). Serbia will become net importers of electricity due to a strong decrease in coal- and lignite-based gen- Fossil-based dispatchable power plants and cost of start-ups in 2017 and 2030. Table 3 Number of Start-up Number Number of Total variable Total start-up start-ups cost/total of units start-ups cost, m€ cost, m€ per unit cost 2017 2202 14365 6.5 70636 721 1.02% Europe 2030 1522 13245 8.7 77664 906 1.17% 2017 167 441 2.6 4443 24 0.54% SEE 2030 89 798 9.0 5824 60 1.04% REKK 24
ANALYSIS | The Southeast European power system in 2030 At the same time, the utilization rates of the differ- in “flexibility services mode”. In the future electric- ent types of power plants will have changed signif- ity system, they will provide more system balancing icantly by 2030, with the utilization of natural gas and flexibility services and receive more of their in- plants climbing to 40% from 7.5% in 2017 and the come from short-term power markets instead from utilization of hard coal-fired plants growing from baseload energy sold on the futures and day-ahead 20% to 34% in the SEE region. The utilization of lig- markets. nite-fuelled plants is projected to fall in Europe and in the SEE region, down from 81% to around 68%, due to deteriorating economic performance and re- Transmission grid constraints and RES duced operating hours (see Table 4). curtailment To gain a deeper understanding of how electric- The model has the option of curtailing vRES produc- ity markets function in the modelled years for SEE, ers (variable RES: PV and wind generators) if needed we analyzed the relationship between utilization for system stability when interconnectors are fully rates and the number of start-ups in detail. Figure 3 utilized and surplus generation cannot be exported. shows the 2017 and 2030 yearly average utilization In keeping with European legislation, curtailed RES rates of non-RES power plants on a unit level. producers are compensated for their curtailment at the level of their forgone revenue.12 The model does The most important change between 2017 and 2030 not need to utilize this option often, as just a few EU is that more and more power plants will be oper- countries – Spain, Portugal and Italy – hit curtail- ated in “peak load” mode: natural gas power plants ment levels in certain hours. In Europe, curtailment with low yearly average utilization rates and a high will not exceed 500 GWh a year in 2030,13 and it number of start-ups (up to 35 times/year). For com- will remain zero in the SEE region. The alternative parison, the highest number of start-ups for a given of non-compensation of RES curtailment was also unit in 2017 was less than 20 in SEE. By 2030 more tested, and confirmed robustness of the results. In than half of the gas-fired units will actively pro- vide flexibility services. The utilization structure 12 See Art. 12 of the recently adopted Electricity Market of coal-, lignite- and HFO-LFO-fuelled plants will Regulation. change similarly by 2030 – increasingly operating 13 This corresponds to 0.014% of European power demand. Utilization rates for different power plant technologies, 2017 and 2030. Table 4 SEE Europe 2017 2030 Change 2017 2030 Change Nuclear 84.8% 85.2% 0.3% 79.2% 81.0% 1.7% Natural gas 7.5% 39.9% 32.4% 27.0% 31.2% 4.1% Utilization Hard coal 20.2% 33.8% 13.5% 36.2% 46.1% 9.9% rate Lignite 77.6% 63.3% -14.4% 80.4% 68.4% -12.0% HFO 0.1% 1.3% 1.2% 4.5% 0.9% -3.7% LFO 0.0% 0.0% 0.0% 7.3% 0.5% -6.8% REKK 25
Agora Energiewende | The Southeast European power system in 2030 Yearly average utilization rates and number of start-ups (per year) on a unit level in the SEE region in 2017 (above) and 2030 (below) Figure 3 40 Gas 35 Nuclear Coal and lignite 30 HFO/LFO Number of start-ups in a year 25 20 15 10 5 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yearly utilization rate [%] 40 35 30 Number of start-ups in a year 25 20 15 10 5 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yearly utilization rate [%] REKK 26
ANALYSIS | The Southeast European power system in 2030 case of non-compensation curtailment levels in- pattern in the correlation of wind generation. Even crease slightly due to market-based decisions of RES within the SEE region, wind speeds show weak cor- producers. However, it still represents a minor level relations, ranging from 11% to 46%. These fairly low of 500 GWh in Europe. The main reason for this low correlations suggest that wind generation would not level of vRES curtailment is the availability of flexi- peak at the same time within the region; rather, it ble hydro resources in the region that can satisfy the would be dispersed over time.14 It also suggests that flexibility need in the power system according to the the region would follow a different wind generation model results, the availability of interconnectors, the pattern from northern European countries, which flexibility potential offered by imports and exports and the low correlation between RES feed-in across borders. 14 This confirms earlier research testing the correlation of wind power feed-in between the countries of the Pentalateral Energy Forum (Austrian, Belgium, France, PV generation is highly correlated within the re- Germany, Luxembourg, the Netherlands, Switzerland) gion, with correlation coefficients ranging from 87% where correlation coefficients ranged from 24% (Austria to 100% between the countries, depending on their and Belgium) to 66% (Luxembourg and Belgium). For more proximity. This is indeed to be expected, as the dif- details, see Fraunhofer IWES (2015): The European Power System in 2030: Flexibility Challenges and Integration ference is mainly caused by the sun’s daily perio- Benefits. An Analysis with a Focus on the Pentalateral dicity. However, and importantly for easing vRES Energy Forum Region. Analysis on behalf of Agora Ener- system integration, we observed a very different giewende. Time series of onshore wind power generation in a simulation for the first week of 2030 at different levels of aggregation Figure 4 60% Actual wind generation/installed capacity [%] 50% 40% 30% 20% 10% 0% 1 25 49 73 97 121 145 169 Hours RO SEE Europe REKK 27
Agora Energiewende | The Southeast European power system in 2030 means that wind production would not peak at the Security of supply: Available reserve same time in the wider European region.15 capacities As can be seen in Figure 4, periods of little or no a) Downward and upward reserve capacities wind power in 2030 will be less frequent and total One of the main features of the EPMM model is its output changes will become softer and slower. These ability to calculate the remaining available upward effects will help lower flexibility requirements in and downward reserve capacities in all hours for all the region. countries individually. These reserve capacities can step in if demand unexpectedly rises in real-time or if generation unexpectedly drops in real-time (e.g. due to a power plant outage or lower than forecasted RES generation). Figure 5 shows the total availa- 15 For example, Grams C. et. al. (2017) find that balancing ble downward reserve capacity for all hours of the future wind capacity across regions – deploying slightly year (in descending order) in the SEE region. There more capacity in the Balkans than at the North Sea, say – is no single hour in 2017 or 2030 when a shortage would eliminate most wind production output variations, of downward reserve could be identified. Moreover, better maintain average generation and increase fleet- wide minimum output. See Grams et al (2017): Balancing the situation improves in 2030 even more, mainly Europe’s wind-power output through spatial deployment due to the deployment of RES and natural gas plants, informed by weather regimes. Nature Climate Change. which can both provide downward regulation. The Total available downward reserve in the SEE region, in all hours of 2017 and 2030 Figure 5 40,000 35,000 30,000 25,000 Capacity [MW] 20,000 15,000 10,000 5,000 0 1 8,760 Hours 2017 2030 REKK 28
ANALYSIS | The Southeast European power system in 2030 Total available upward reserve in the SEE region, in all hours of 2017 and 2030 Figure 6 40,000 35,000 30,000 25,000 Capacity [MW] 20,000 15,000 10,000 5,000 0 1 8,760 Hours 2017 2030 REKK minimum downward reserve capacity is projected able capacity drops below 15% of consumption, and to be ca. 11 GW in 2030 – this corresponds to 27% of it never falls below 12%. General evaluation criteria the regional peak load. indicate that a minimum of 5–10% of consumption is needed for upward reserve capacity to guarantee For upward reserve capacities, somewhat differ- security of supply. By these lights, the SEE region ent patterns can be observed. The amount of availa- will have a sufficient level of supply security in ble upward reserve capacities in 2030 is lower than 2030 (see Figure 7). in 2017. This is the result of a drop in the number of dispatchable units fuelled mainly by coal and lignite. b) Missing production Still, the upward reserve capacities are not expected Another widely used evaluation criterion for secu- to fall below 5 GW in 2030, which corresponds to rity of supply is the number of hours with missing 12% of the regional peak load. For the vast majority production. There was no such modelled hour in the of hours in 2030, upward reserve capacities do not region in 2017, while the model predicts low levels drop below 20 GW (see Figure 6). of missing production in 2030. Table 5 indicates the number of hours in which capacities are insuffi- To assess whether this drop is critical, we compared cient. The scenario shows hours with missing pro- the total available upward reserve capacity with duction in Albania, Kosovo* and North Macedonia. total consumption in SEE for all hours of the mod- However, the missing production levels occur in one elled years. There are only 5 hours in which avail- or two hours of the year, which indicate very low 29
Agora Energiewende | The Southeast European power system in 2030 Total available upward reserve in the SEE region by percentage of consumption, 2017 and 2030 Figure 7 250% 200% Total upward reserve/consumption [%] 150% 100% 50% 0% 1 8,760 Hours 2017 2030 REKK load-shedding requirements. The typical security of Number of hours with missing production supply standards in the EU range from three to six in the SEE countries. Table 5 hours of loss-of-load expectation. Number of hours with missing production The results on missing production levels and low 2017 2030 cross-border correlation of vRES feed-in empha- AL 0 1 size the importance of regional cooperation and the BA_FED 0 0 availability of sufficient interconnection capacity BA_SRP 0 0 between countries. As can be seen in the sensitiv- BG 0 0 ity analysis later in the report, increasing intercon- GR 0 0 nection levels between the countries (represented HR 0 0 by increasing NTC values) can eliminate missing KO* 0 2 production hours entirely, because countries with ME 0 0 this problem can rely on imported electricity from MK 0 1 neighbouring power systems. Though the sensitiv- RO 0 0 ity case with decreasing interconnection capacities RS 0 0 still shows missing production in the system, it re- REKK mains a very low fraction of the total. 30
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