12/2015
The integration cost of wind and solar power
An overview of the debate on the effects of adding wind and solar photovoltaic into power systems
Main conclusions:
Three components are typically discussed under the term “integration costs” of wind and solar energy: grid costs, balancing costs and the cost effects on conventional power plants (so-called “utilization effect”). The calculation of these costs varies tremendously depending on the specific power system and methodologies applied. Moreover, opinions diverge concerning how to attribute certain costs and benefits, not only to wind and solar energy but to the system as a whole.
Integration costs for grids and balancing are well defined and rather low. Certain costs for building electricity grids and balancing can be clearly classified without much discussion as costs that arise from the addition of new renewable energy. In the literature, these costs are often estimated at +5 to +13 EUR/MWh, even with high shares of renewables.
Experts disagree on whether the “utilization effect” can (and should) be considered as integration costs, as it is difficult to quantify and new plants always modify the utilization rate of existing plants. When new solar and wind plants are added to a power system, they reduce the utilization of the existing power plants, and thus their revenues. Thus, in most cases, the cost for “backup” power increases. Calculations of these effects range between -6 and +13 EUR/MWh in the case of Germany at a penetration of 50 percent wind and PV, depending especially on the CO2 cost.
Comparing the total system costs of different scenarios would be a more appropriate approach. A total system cost approach can assess the cost of different wind and solar scenarios while avoiding the controversial attribution of system effects to specific technologies.
Summary:
The cost to generate electricity from wind and solar has significantly declined in recent years – in fact, the levelized cost of electricity of wind energy and solar PV is now below that of conventional power in many parts of the world, and further cost reductions are expected. Across the globe, more and more countries are therefore planning to add significant amounts of renewable energy to their electricity systems.
Yet wind and solar power plants are different from conventional power plants in one key respect: They provide electricity when the wind blows and the sun shines, but cannot be switched on based on demand. Furthermore, they are often built far away from high demand areas, which may create a need for new grid infrastructure. Therefore, in order to compare the cost of power from wind and solar with that of coal and gas, the term “integration cost” is often used.
The proper measurement of integration costs is a hotly debated subject in academic and policymaking circles. To shed more light on this debate, we conducted two expert workshops in Germany and France, inviting experts from the domains of academia, industry and politics to discuss different perspectives on integration costs. The following paper is the product of this discussion and our own analysis.
With this paper, our aim is not to “solve” this issue. Rather, we hope to make a positive contribution to informed debate.