Next Generation Wind and Solar Power: From Cost to Value

Industry Reports


• Wind and solar photovoltaics (PV) are currently the fastest-growing sources of electricity globally. A “next-generation” phase of deployment is emerging, in which wind and solar PV are technologically mature and economically affordable.

• The success of variable renewable energy (VRE) is driving change in power systems around the globe. Electricity generation from both technologies is constrained by the varying availability of wind and sunshine, which causes fluctuations in the electricity output of VRE sources over time. As a result, changes to the way electricity generation and consumption are balanced may be required. The degree to which this poses a challenge depends on the interplay of several factors that vary by country.

• As long as the contribution of wind and solar PV to the annual electricity mix does not exceed a few percentage points, their integration poses few challenges. However, as VRE enters its next generation of deployment, the issue of system and market integration becomes a critical priority for renewables policy and energy policy more broadly.

• A comprehensive and systemic approach is the appropriate answer to system integration, best captured by the notion of transformation of the overall power system. This requires strategic action in three areas:

• System-friendly deployment, which aims to maximise the net benefit of wind and solar power for the entire system.
• Improved operating strategies, such as advanced renewable energy forecasting and enhanced scheduling of power plants.
• Investment in additional flexible resources, comprising demand-side resources, electricity storage, grid infrastructure and flexible generation.
• Wind and solar power can facilitate their own integration by means of system-friendly deployment strategies. Six areas are most important:
• System service capabilities. Technological advances have greatly improved the degree to which VRE output can be forecast and controlled in real time. With the right framework conditions in place, VRE can help to balance supply and demand despite its dependence on the availability of wind and sunlight. For example, Denmark has gradually increased the role of wind power in providing system services and has updated technical standards (grid codes) to ensure the performance of new plants.

• Location of deployment. With the cost of solar PV and (onshore) wind power falling rapidly, deployment is becoming economically feasible even in lower resource conditions.

As a result, there are more choices for locating power plants, which means that they can be placed to produce electricity closer to demand. For example, through its new auction system Mexico has attracted solar PV investments in areas of high electricity prices, i.e. in areas where solar PV has a high system value, rather than in locations of best resource. 

• Technology mix. The output of wind and solar power is complementary in many regions of the world. VRE can also be complementary to other renewable resources such as hydropower. Deploying a mix of technologies can thus bring valuable synergies; for example, Brazil is developing both wind power and new hydro resources.



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