Though pump storage remains important, new-build flexibility assets will focus largely on interconnectors, gas peakers and energy storage. Combined deployments of the three technologies will grow from 122 GW in 2020 to 202 GW by 2030 and reach 260 GW by 2040, Wood Mackenzie forecast, stressing “without this new fleet, the system would become unmanageable.”
“The only dispatchable assets – those that can be used on demand – constructed will be purpose-built flexibility assets. These will be designed to compliment and capitalise on a new system architecture.” WoodMac’s principal analyst Rory McCarthy stressed. The Edinburg-based consultancy has used its hourly dispatch model and forecast technology costs to create a new European energy storage outlook.
Energy storage to overtake gas peakers
Gas peaking plants have for long been used to balance intermittent renewable energy supply. They can ramp up to full output from warm in a couple of minutes for modern systems, have increasing efficiency levels at part loading and boast unlimited duration – assuming a reliable gas supply.
“Yet, by 2030, energy storage will beat gas peakers on cost across all our target markets, resulting in a cloudy outlook for any new future peaking turbines. Fuel and carbon prices are on the up, technology costs are not set for any major decreases and net-zero policies will eventually target the decarbonisation of all power market services,” McCarthy noted. “Unabated gas is likely to be the EU’s next target after coal, although market forces are already pushing it out.”
Although energy storage will dominate the build out during the 2030s as gas peaker capacity plateaus, gas peakers will continue to be critical and will fulfil the role of backup and grid balancing. However, gas units, including large combined-cycle power plants (CCGTs) that cannot find a way to operate profitably with reduced utilisation and increased flexibility, will be forced to close.
New energy storage to near 90 GW by 2040
Storage across all segments will to grow from 3 GW in 2020 to reach 26 GW in 2030, and up to 89 GW by 2040, according to Wood Mackenzie findings.
System durations are set to increase in line with falling battery cost. By 2040, some 320 GWh of energy storage (excluding pump storage) capacity could be available to balance the system on a second-to-second basis.
“For storage and solar-plus-storage, technology costs will continue to decline. The levelised cost for a standalone 3-hour system will reduce by 33% through 2030. Its ability to take advantage of peaks alongside gas plants and capitalise on low and negative prices, which gas plants cannot, pushes it into preferred flexible asset territory,” McCarthy explained.
Coal and nuclear power to lose out
The rise of renewables will go at the expense of coal generation, which is being phased out in Germany by 2038. Nuclear power will also lose out throughout Europe, forecast to fall 41 GW in operational capacity by 2040.
Large gas plants are also expected to experience a net reduction of 40 GW over this period as utilisation is pushed down. Energy storage and interconnectors, alongside demand response, meanwhile are expected to become the key tools when dealing with common low and negative net load hours.
“Without these tools at the system operator’s disposal, we would have to curtail an eyewatering amount of clean energy,” McCarty warned. In his view, “the market needs to provide the right signals for a high capex renewables build-out.” This could mean paying for flexibility services instead of just paying for the electricity produced.