The International Energy Agency said in a significant study published on Wednesday that wind power and solar photovoltaics (PV) have been rare bright spots in an otherwise-bleak picture of clean energy progress in recent years. The agency says the inherent variability of wind power and solar PV is raising concerns on reliability and cost-effectiveness while supporting high shares of variable renewable energy (VRE). It concludes that any country can reach high shares of wind, solar power cost-effectively.

The International Energy Agency is based in Paris and has a membership of 28 industrialised countries including Ireland and its study says that it’s possible for power systems to manage as much as 45% of annual power from solar and wind, while maintaining power reliability at “little additional long term cost over a system with no variable renewables at all.”

“Integrating high shares of variable renewables is really about transforming our power systems,” Maria van der Hoeven, IEA executive director, said at the launch of The Power of Transformation - Wind, Sun and the Economics of Flexible Power Systems, the latest in a series of IEA reports shedding light on the challenges and opportunities of integrating VRE into power systems globally.

“This new IEA analysis calls for a change of perspective,” she explained. “In the classical approach, variable renewables are added to an existing system without considering all available options for adapting it as a whole. This approach misses the point. Integration is not simply about adding wind and solar on top of ‘business as usual’. We need to transform the system as a whole to do this cost-effectively.”

Currently, wind and solar PV account for just about 3% of world electricity generation, but a few countries already feature very high shares: In Italy, Germany, Ireland, Spain, Portugal, and Denmark, wind and solar PV accounted respectively from around 10 to more than 30% of electricity generation in 2012 on an annual basis.

The report says that for any country, integrating the first 5-10% of VRE generation poses no technical or economic challenges at all, provided that three conditions are met: uncontrolled local “hot spots” of VRE deployment must be avoided, VRE must contribute to stabilising the grid when needed, and VRE forecasts must be used effectively. These lower levels of integration are possible within existing systems because the same flexible resources that power systems already use to cope with variability of demand can be put to work to help integrate variability from wind and solar. Such resources can be found in the form of flexible power plants, grid infrastructure, storage and demand-side response.

Going beyond the first few percent to reach shares of more than 30% will require a transformation of the system, however. This transformation has three main requirements: deploying variable renewables in a system-friendly way using state-of-the art technology, improving the day-to-day operation of power systems and markets, and finally investing in additional flexible resources.

The challenges of such transformation depend on whether a power system is “stable,” meaning no significant investments are needed to meet demand in the short term, or “dynamic” which requires significant investments short-term, to meet growing power demand or replace old assets.

The publication helps to clarify the very different perception of wind and solar around the globe. In stable systems, such as those in Europe, the existing asset base will help to provide sufficient flexibility to increase VRE generation further. However, in the absence of demand growth, increasing VRE generation in stable systems inevitably comes at the detriment of incumbent generators and puts the system as a whole under economic stress. This outcome is based on fundamental economics; market effects are thus not only a consequence of variability. The transformation challenge in stable systems is twofold: scaling up the new, flexible system while scaling down the inflexible part of the old.

Governments with stable systems face tough policy questions about how to handle the distributional effects, in particular if other power plants need to be retired before the end of their lifetimes and, if so, who will pay for stranded assets. Meeting these challenges will only be possible through a collaborative effort by policy makers and the industry. In any case, “these surmountable challenges should not let us lose sight of the benefits renewables can bring for energy security and fighting dangerous climate change. If OECD countries want to maintain their position as front runners in this industry, they will need to tackle these questions head-on,” Van der Hoeven said.

By contrast, in “dynamic” power systems such as in India, China, Brazil and other emerging economies, wind power and solar PV can be cost-effective solutions to meet incremental demand. VRE grid integration can - - and must  - - be a priority from the onset. With proper investments, a flexible system can be built from the very start, in parallel with the deployment of variable renewables. “Emerging economies really have an opportunity here. They can leap-frog to a 21^st century power system --  and they should reap the benefits,” the IEA executive director concluded.

To read the remarks of  Maria van der Hoeven, executive director, at the launch, click ‌‌‌here.

To see the presentation that accompanied the report's launch, click here.

To read the executive summary, click here.

To see a fact sheet for The Power of Transformation, click ‌here.