Overview
This study explores the interdependencies of different power generation technologies in a highly decarbonised future. Most modern electricity grids around the world are now progressing along the decarbonisation journey to deliver reliable, affordable and low carbon power – and with that transformation comes attendant challenges. While there are differing views on the roles particular technologies might play in the grid of the future, interdependencies between technologies are particularly influential in achieving the mix of technologies that maintains grid reliability while meeting net-zero emissions at lowest total system cost.
Finding the generation mix with the lowest total system cost (TSC) for deep levels of decarbonisation is critical for electricity consumers and taxpayers, who together need to cover the costs of the entire electricity system. A future system must maintain system security and “keep the lights on”. The modelling, based on the model “Modelling Energy Grid Systems” (or MEGS), ensured that the technical constraints of a secure and competent grid were met. As well as meeting demand at each sequential time step, MEGS models grid services, such as firm capacity, inertia, and frequency response, ensuring that there are sufficient volumes of these balancing mechanisms available to the grid operator.
Via three case studies, the analysis sought to demonstrate what opportunities the Australian and Japanese stakeholders would have to achieve a net zero power system at lowest cost by 2050. While focusing on the lowest TSC opportunities, the analysis showed that all decarbonisation solutions for transitioning to a decarbonised grid were more expensive than maintaining today’s high‑carbon grid. Constraining some of the technology options for this radical transformation increased the overall decarbonisation costs and, in some circumstances, limited the ability to reach net zero at all. It also showed that while all technologies would need to be available for decarbonisation, CCS was central to the optimum solutions available. Without CCS, especially in conjunction with BECCS to create negative emissions, it was difficult to approach full decarbonisation at a reasonable cost.
The modelling exhibited a clear lowest cost frontier that, as it approached net zero, became increasingly expensive. All efforts to reduce carbon emissions in a power grid of the future would come at an increased cost. Hence a major driver for managing this transition will be working towards the best outcome whilst keeping the cost increases as low as practicable. The work demonstrated clearly that, from a technical standpoint, renewables alone cannot be used to achieve net zero. It also demonstrated that a lowest cost solution without BECCS would be very expensive.
Summary
- The global energy transition to net-zero CO₂ emissions is proving to be a greater challenge than many had previously imagined. The many conflicting international, national, regional, and local priorities make planning for a net-zero future a demanding task.
- To transition to net-zero CO₂ emissions from electricity generation will be a complex challenge. The selection of technologies that will deliver the lowest cost net-zero future while maintaining a reliable grid will be crucial. Not all electricity grids will meet net-zero emissions within the timescales required and will require negative emission technologies or processes to compensate.
- Supplying electricity is but one of many services that technologies provide to the grid, and this needs to be recognised in how technologies are valued and costed. As well as generating electricity, some technologies provide a range of additional grid services that are essential for maintaining a permanent and stable electricity supply. Focusing only on a technology’s ability to deliver electricity could well lead to the dismissal of technologies critical to a functioning, lowest cost system.
- In a grid with a growing penetration of variable renewables,1 there is an increasing requirement on system operators to have access to frequency response, inertia, reserve capacity and other grid services – and fossil-based generation, the conventional sources of these services, is gradually being displaced.
- Modelling the electricity grid has gained importance in recent years given the transformational change required to reduce CO₂ emissions. Electricity system models are important tools, employed to develop and test the implications of possible future scenarios. For example, as generation from variable renewable technologies grows, modelling is required to consider matters such as additional transmission capacity, back-up supply for renewable droughts and grid stability. Policymakers and other key stakeholders often rely on outputs from these models to inform their decisions.
- Historically, the levelised cost of electricity2 (LCOE) has been the metric most often used for evaluating the relative merits of different generation technologies. While it remains a useful metric for comparing the relative merits of homogeneous generation technologies that offer the same ancillary services (i.e. maintaining system frequency and voltage, reserve capacity and providing an ability to restart the system from a total/partial shutdown), as the generation mix diversifies, LCOE is no longer an adequate metric considering the heterogeneity of services provided by the new portfolio of technologies. To address these failings, several LCOE variants have been proposed. However, by retaining a levelised cost approach, shortcomings remain.
- An alternative approach is to calculate the total system cost (TSC). TSC is gaining traction as a more appropriate cost metric for a changing grid. Currently, only a few within the modelling community focus on TSC and on delivering a decarbonised system that minimises cost to the consumer. TSC is the metric that reflects most closely the price paid by the consumer for the power they consume.
- Modelling Energy and Grid Services3 (MEGS) is the modelling tool employed for this study. It explores the decarbonisation of power systems at lowest TSC. It is a regional electricity system model that not only ensures there is sufficient firm capacity to meet demand but also that the grid operator has sufficient services to maintain grid supply and stability.
- Subject to maintaining a secure grid and meeting CO₂ emissions limits, the minimisation of TSC is the primary concern in both the short and long-term planning horizons. It is also important to note that MEGS remains free from policy constraints, making it a transparent exercise to estimate the lowest TSC. The impact of policy and regulation on the lowest TSC may then be explored as required.4
- The model was used to investigate the interdependencies of different power generation plants in a highly decarbonised future. The role of fossil and biomass generation (with and without CCS), alongside other technologies important for a zero-carbon future5, was examined via case studies that focused on Australia and Japan.
- While focusing on the lowest TSC opportunities, the analysis showed that:
- There were viable scenarios for a net zero 2050 electricity grid.
- All decarbonisation solutions for transitioning to a decarbonised grid were more expensive than today’s grid.
- While all technologies would need to be available for decarbonisation, CCS was central to the optimum solutions available. Without CCS, especially BECCS to create negative emissions, it was difficult to approach full decarbonisation at a reasonable cost.
- The modelling demonstrated a clear lowest cost frontier that, as it approached net zero, became increasingly expensive.
- The analysis demonstrated clearly that, from a technical standpoint, renewables alone cannot be used to achieve net zero.
