As auction programs mature and the shares of renewable energy increase, countries must integrate the energy procured into their power systems effectively and improve their markets.

As auction programs mature and the share of variable renewable energy (VRE) in power systems increases, many countries find that grid integration concerns become a real barrier to scaling up renewable energy. Policymakers’ objectives often evolve from low power generation costs to enhancing dispatchability and improving the value of renewable energy. This can be accomplished by delivering renewable energy when and where it is needed and reducing integration costs.

System Integration

The policies and procurement models favored in the last decade have spurred significant renewable energy adoption and helped reduce generation costs. While the growth in renewable energy technologies brings many benefits, it also brings system integration challenges and increased associated costs that may be recognized only after some generation capacity is commissioned. The uncertainty and variability of wind and solar generation can pose challenges for grid integration.

Policymakers often try to address these challenges by adding requirements related to grid integration, the timing of energy output, and the desired locations for renewables. Many policymakers identify specific geographic zones where they want renewable capacity, and in some cases, new transmission capacity is added to serve these zones. Countries such as Brazil, Kazakhstan, and Turkey have used more sophisticated auctions that specify the locations and capacity caps in small zones that fit the capabilities of the existing transmission grid.

Market Integration

Auctions that award pricing based on seasonality or time of use can help improve system integration. Energy delivered at times with higher demand receives a higher payment. In countries that use a single buyer rather than a wholesale market, demand is broken up in time blocks that receive higher payments. In countries with wholesale markets, an entity (market operator, distribution utility, etc.) makes additional payments for energy at a certain point in time.

The most common innovations used to integrate renewable energy into electricity markets are the feed-in premium (FIP) and contract for difference (CFD), which require that renewable generators sell directly into the country’s wholesale market. In addition, renewable energy generators are also allowed to participate in ancillary services and balancing markets. Since 2015, some bidders in FIP or CFD auctions have bid zero premium payment, making them full market participants and demonstrating efficient/mature markets with no public subsidy.

Resources

• © yu / Adobe Stock

  White Paper

  Oct 2020

  Bangladesh: System-Friendly Renewable Energy Procurement

  The white paper analyzes design solutions for system-friendly renewable energy procurement in Bangladesh and provides recommendations on their implementation. Read the white paper

• Jason Blackeye / Unsplash

  White Paper

  Jul 2020

  System-Friendly Competitive Procurement for Renewables

  Key design elements of successful, system-friendly, renewable energy procurements include time-based incentives and penalties, aggregators or virtual hybrids, procurement of physical hybrid solutions, and location-based incentives. Read the white paper

• © artjazz / Adobe Stock

  White Paper

  Jul 2020

  Technology Selection in Auctions: Lessons Learned

  Countries must decide which technologies should compete in the auction. Based on the policy objectives and the stage of the auction program, countries can choose from a broad technology spectrum. Read the white paper

• Sarah Fretwell / USAID

  Website

  Greening the Grid

  The National Renewable Energy Laboratory and USAID provide expertly curated information and guidance to support countries in power system transformation and grid modernization. Visit the website

• Andrea Boldizsar / Unsplash

  White Paper

  Jun 2020

  Variable Renewable Energy Forecasting

  Grid operators and regulators can use variable renewable energy (VRE) generation forecasting as a cost-effective method for addressing barriers to the grid integration of VRE. Read the white paper

• Ben Paulos (CC BY 2.0)

  White Paper

  Jun 2020

  Impact on System Operations

  Policymakers can improve a national power system’s operations and dramatically cut costs by increasing the power system’s flexibility to integrate large amounts of variable renewable energy. Read the white paper

• American Public Power Association / Unsplash

  White Paper

  Jun 2020

  Challenges in the Development of VRE in Bangladesh

  Energy stakeholders outline barriers to scaling up variable renewable energy (VRE) in Bangladesh and present solutions to spur growth in grid-connected renewables. Read the white paper