Meeting Demand in High Growth Markets (2)


Part 2: Building a Resilient Power Mix (Egypt Example)

In Part 1 of this article, speculating on possible future electricity generating mixes for Egypt, we saw that there was a big supply gap to be filled – and one suggestion of how this might be achieved. However we focused purely on delivering enough GWh each year, without worrying about whether they were being delivered at the right time.

So here we’ll think about GW as well as GWh. We’ll speculate on a generating mix (or options) that delivers not only enough GWh during each year, but is also resilient enough to deliver sufficient GW whenever they are needed. As in the previous post, the charts come from an energy mix model of my own creation; one which I use primarily as a training tool on some of the courses I deliver.

In the Low Growth scenario defined in Part 1, peak demand would rise from just under 30GW to over 70GW (depending on various other assumptions made in the model). Along with efficiencies to keep overall energy consumption achievable, I’d suggest that in markets like this it’ll also be essential to keep peak demand growth under control, using a variety of demand management mechanisms (e.g. demand response, using storage to time-shift generation demand; and so on). Let’s assume these measures keep peak demand down closer to 60GW (while keeping the high growth scenario at the back of our minds as strong motivation to do so!).

The rise in peak demand, and the impact of demand management in reducing its growth, is illustrated in this chart.

Figure 1: Growth in peak power demand (and efforts to manage it below “business-as-usual”)

Pt 2 Fig 1

In Part 1, we suggested one generation mix scenario which provided enough GWh of electricity every year and looked like this:

Figure 2: A proposed low-carbon scenario to meet Egyptian electricity demand growth

Pt 2 Fig 2

Here’s that last chart shaded differently, dividing our generation mix into two types: conventional fuelled sources plus hydro (all of which we can control to greater or lesser extents) and solar and wind (which depend on the weather).

Figure 3: “Dispatchable” (controllable) vs. non-dispatchable sources of electricity in the proposed scenario (energy basis)

Pt 2 Fig 3

Before signing off on this solution to Egypt’s problems, we might want to worry about whether our future mix, being increasingly dependent on non-dispatchable power plants, can always be available when demand is at its peak!

This next chart compares rising peak demand with the total installed capacities of dispatchable sources, plus wind and solar.

Figure 4: Dispatchable (controllable) vs. non-dispatchable sources of electricity in the proposed scenario (capacity basis)

Pt 2 Fig 4

In 40 years’ time, peak demand is just over 60GW. However, although over 95GW of total power capacity is installed, less than 40GW of this capacity is “dispatchable”. Whether the lights stay on will depend on whether the sun is shining and/or the wind blowing at the right time.

According the Egyptian Electric Holding Company (page 10 of the last annual report), Egypt’s demand curve is such that peak occurs around 7pm and demand stays high through until the early hours. If this pattern were to remain through our modelled timeframe, solar would only contribute to peak demand if equipped with a substantial capacity of storage (batteries for PV and perhaps molten salt or other heat storage for CSP). Another factor favouring solar could be a shift in peak demand to earlier in the day, when the sun is out, if enough of this demand is driven by air conditioners.

It does give pause for thought though. Even in a country as blessed with sunshine as Egypt, while solar could provide enough GWh of energy to help meet rising electricity demand, it is probably dependent on the implementation of other measures (=other investment) in order to provide this energy at the right time.

I don’t have data on when the wind blows in Egypt, but the nature of wind elsewhere is that its timing is inherently more variable than solar – it too is likely to provide little “capacity credit” in the absence of time-shifting capabilities.

Here’s the same chart as above, but now with an assumption that the “capacity credits” of both solar and wind increase steadily from 0% today to 33% over the modelled period. In other words, for each GW of these technologies installed, a third is assumed to be available on demand, at any time. These growing portions of guaranteed solar and wind capacity are now included in the black “dispatchable” total, with the remaining solar and wind capacity added on top.

Figure 5: Increased dispatchable capacity due to increasing “capacity credit” assigned to wind and solar (33% by year 40)

Pt 2 Fig 5

Increase the capacity credit high enough and it’s possible to fully meet peak demand by increasing the proportions of wind and solar that can be included within the black area – applying each a capacity credit of 45% by year 40 will do the trick. I believe that kind of figure is perfectly achievable over that period of time; and probably sooner than that.

However, because much of the demand growth is being assumed delivered by solar and wind, a gradual rise in our capacity credit assumption won’t do (you can see how the black curve dips below the red required peak demand almost straight away, before catching up later on; particularly as more nuclear is added in the last 10 years. In fact, to perfectly mirror the black area with the red line we need capacity credits for solar and wind to reach 30% within just 10 years and 40% by year 20. That 10-year target in particular might be too optimistic?

So how else might we balance sufficient energy growth with keeping emissions down, while keeping the lights on when they’re needed?

If we need more guaranteed capacity in the early years, when high capacity credits for renewables are hard to reach, then we might just have to build some. Gradually adding 5GW more gas during the first 20 years of the model (at a cost of $4.5bn at most) proves to be enough to meet our capacity demands by boosting the level of installed dispatchable capacity.

Figure 6: Increased dispatchable capacity: gradually increasing “capacity credit” assigned to wind and solar (to 33% by year 40) + 5GW more gas power plants

Pt 2 Fig 6

However if we burn our newly increased gas capacity as regularly as before (the present day capacity factor used is 61%), we end up with too much energy!

Figure 7: The impact of 5GW more gas capacity at the same capacity factor as today.

Pt 2 Fig 7

One solution would be to export and sell the excess energy, assuming sufficient interconnector capacity exists (and indeed there is talking of increasing the flow of electricity between Egypt and Saudi Arabia). However a more obvious one is to burn our gas capacity less often – reducing its capacity factor.

In this case, to shrink the gas area on the chart above and bring energy generation back into balance with demand (i.e. back to Figure 2), a relatively small reduction in gas capacity factors is sufficient: from 61% down now to 56% in year 10 and 50% from year 20 onwards.

It’s important to stress again that this isn’t forecasting. It’s just playing around with different scenarios to try to make the numbers of a future power mix add-up – and, more importantly, to understand and illustrate the various and interrelated factors that any energy mix plan needs to take into account.

For example, it’s hopefully intuitive that in a different scenario, where we are less optimistic as regards the capacity credits assigned to solar and wind in future, they will contribute less to guaranteed supply (in GW terms). This can be countered by building even more new gas capacity. However this greater capacity will be required to burn even less often, in order not to exceed the required energy demand (in GWh).

In my view, the latter is the likely short-term situation in such fast-growing markets. Renewables provide quickly and incrementally deployed electricity generation which is emissions free (in terms of both carbon and smog/pollution). However until storage, interconnection, demand management and other mechanisms reach sufficient scale, flexible conventional generation may continue to be needed too; guaranteeing sufficient supply is always available to meet demand. It will depend to a great extent on the shape of the daily demand curve. Gas is the cheapest capacity to build (per W), which means the least money is spent on something that we hope will operate infrequently. It’s flexible too, so seems the sensible choice.

In the longer-term – and much quicker than the 40 year timeframe we’ve looked at here – I’m confident that storage and other mechanisms will substantially increase the level of guaranteed capacity (capacity credit) that we can apply to variable renewables.

Whatever the eventual outcome and its timeframe, it’s interesting to note one similarity with the situation I discussed in an otherwise very different, developed market – the UK – in a previous post. In both cases, the increased deployment of renewables will – for some time to come – mean flexible conventional capacity will need to get accustomed to being there, but operating less and less as time passes. As described in that previous post, this presents something of an investment dilemma. As in the UK, to get new capacity built developing markets may also need to start looking at mechanisms of paying conventional power plants based on capacity rather than simply on generated energy.

Finally, it should be clear from this two-part article that the further out from the present day we look, the more uncertainty in macro demand growth exists (including the ability to control it through efficiency and demand management measures). Big deviations from modelled demand growth will hugely alter the requirements of any proposed or planned energy mix.

Since looking ahead is hard and technology moving quickly, flexibility will be vital – on both the supply and the demand sides of the equation!

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