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GSR 2015

32 01 GLOBAL OVERVIEW SIDEBAR 2. INNOVATING ENERGY SYSTEMS: POWER SYSTEM TRANSFORMATION Power systems have been planned and operated in much the same way for generations. Today, however, a broad constellation of factors is driving significant change: growing concerns over the local and global impacts of fossil fuel emissions; a swiftly evolving energy security landscape; the imperative of universal energy access; rapidly changing technology costs; greater democratisation of energy supply; increased interactions with water and land-use sectors; and dramatic advances in network intelligence and system optimisation. These forces call for significant power system transformation. Evidence from around the world shows that technical and institutional innovations are arising to unlock new system capabilities. Key innovations that have emerged and have begun to diffuse fall broadly into four categories: planning processes, operational practices, prices and tariffs, and enabling technologies. Examples include: Planning Processes. As water, climate, and health impacts of energy production have become more widely understood and measured, they are being explicitly incorporated into integrated resource planning in some jurisdictions. For example, in the arid southwest of the United States, the Arizona Public Service (APS) utility planning process examines risks and benefits across a range of water and emissions scenarios, leading to greater emphasis on renewable energy technologies for supply. Several emerging markets also are shifting to more pro-active and comprehensive energy planning processes to account for unique characteristics such as energy access and economic development. In jurisdictions with already high and growing shares of renewables, planning processes are evolving to include, among other things, better geospatial analysis of renewable energy resources, new approaches to co-ordinating transmission grid build-outwithrenewablegeneration,andmoredetailedreliability metrics to ensure reliable power systems as renewable shares grow. For example, the transmission system operator in Ireland (EirGrid) has developed a multi-phase process to maintain orderly deployment of transmission and wind generation, and it employs highly detailed reliability analyses to explore system operation under future wind generation scenarios. Operational Practices. Balancing electricity supply and demand has always had an element of variability and uncertainty, and this grows along with the share of renewables. A variety of operational practices allow this growth to be managed cost- effectively and reliably, including improved weather forecasting, improved generator scheduling, and increased co-ordination with neighbouring grid systems. Better forecasting, for example, has diffused into nearly all major systems with significant amounts of wind power, such as in Canada, China, Germany, Ireland, Portugal, Spain, and the United States. Prices and Tariffs. The design of prices and tariffs has been a linchpin of power system architecture. Today, prices and tariffs are increasingly important not only in driving renewable energy adoption but also in encouraging demand response, flexible performance from generators, energy efficiency, and investments in distributed generation. For example, various markets with high shares of renewables are witnessing general reductions in the wholesale market prices of electricity, as wind and solar bid with zero or near-zero incremental costs. These price reductions may reduce the profitability of those conventional generators that can provide essential grid services. In response, some market operators are implementing specific products—such as capacity payments or “pay-for-performance” mechanisms—to adequately compensate generators and demand-response providers for their services in providing dispatchable supply and in balancing the grid. Enabling Technologies. To support power system transformation, investment is increasing in enabling technologies, including innovative water-saving generation technologies, “smart” inverters for new solar PV generation that can enable dynamic power output adjustments, smart meters and other technologies to enable demand response, battery and pumped hydro storage, and flexible thermal generators. For example, German utilities are retrofitting existing coal-fired power plants to enable them to ramp up and down more rapidly in order to integrate variable renewable resources more flexibly. In Denmark, CHP plants serve as a storage reservoir for variable wind power. Together, these innovations give a sense of how broadly the landscape is changing in response to, and in support of, renewable energy deployment. The coming decades likely will bring even more change as the costs drop for renewables, storage, and network intelligence technologies. Strategic management of power system transformation will consequently become an increasingly important area of focus.i The “Innovating Energy Systems” sidebar is a regular feature of the Global Status Report that focuses on advances in energy systems related to renewable energy integration and system transformation. Source: See Endnote 57 for this section. i - A deeper discussion of these changes and the road ahead can be found in the Status Report on Power System Transformation from the Clean Energy Ministerial, a forum of leading energy ministers that promotes policies and programmes that advance clean energy technology and encourages the transition to a global clean energy economy.

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