This study is making the first attempt to perform a quantitative assessment of the full cost of VRE integration (System LCOE) into the South’s IPS considering the impact of geospatial optimization on the cost. The study considers scenarios for integrating significant volumes of wind and solar power generation, such as 30/50/70% of the peak consumption from the power system.
Key findings
- The full cost of VRE integration (System LCOE) is a significant factor for energy and economic planning as VRE integration costs go up significantly with an increase in the installed capacity of VRE plants. Thus, the full cost of VRE integration into the South’s IPS, where their share is as much as 30–70%, can exceed LCOE by 1.3-3 times (RUB6.4–14.0/ kWh, with the VRE generation cost LCOE of RUB4.7–5.2/kWh).
- Geospatial distribution of VRE sites across the country reduces the cost of VRE integration: the optimal distribution makes it possible to cut the integration costs by 46–61% and the full cost of VRE by up to 12–38%, as well as increasing the reliability and fuel efficiency of the entire power system.
- Power companies and consumers incur significant "hidden" costs: if renewable energy accounts for 30–70% of the total capacity of the system, additional costs of consumers and the power market related to grid construction, balancing and curtailment compensation can reach RUB17–339 billion annually depending substantially on a selected geospatial model of VRE integration.
- The integration costs lie with the ‘public party’: the cost of financing the integration may be significantly higher, with such financing being less available compared to financing the construction of a renewable energy facility itself.
- The optimum for the developer and the public party is not the same: the developers’ focus on economies of scale (a growth in a unit capacity of a VRE plant and selection of sites based on a maximum CUF) leads to a disproportionate increase in the integration costs for consumers. This requires a balanced approach when designing renewable energy development programs to ensure a balance of interests and minimize the System LCOE.
The full version of the study is available here.
