A new E3G report based on analysis from Imperial College London lays to rest the argument of a preventative ‘hidden’ cost of renewable power, as investment in grid flexibility lowers the final costs for the grid and for bill payers.

Imperial College has undertaken a new study exploring the issue of system integration costs of renewable generation. The analysis found that the variable output of renewable technology can either be covered by building half as much low carbon generation again, or – as a cheaper option – including some flexibility.

The study showed that under the current trajectory onshore wind will be at least 22% cheaper than nuclear with offshore wind and solar PV providing savings in excess of 4% and 8% respectively. It predicted that system integration costs would remain less than £10/MWh for a wide range of system characteristics at these increased levels of penetration.

E3G said: “The important conclusion from this study is, therefore, that the cheapest way to decarbonise the power system involves large volumes of variable renewable generation even when taking system integration costs into account. The Government can proceed with investment in renewable generation without risking unnecessary escalations in system costs and a burden on consumers.”

However, E3G said the government needed to take the following steps to ensure these benefits will happen:

1. The Government plan to deliver carbon budgets should maximise the advantages for consumers and the economy. It can do so by providing a clear trajectory for deployment of low-carbon generation that is consistent with delivering long term carbon budgets at least cost.
2. The Autumn Statement should set out a commitment to developing a new design for the Levy Control Framework in line with the deployment trajectory and announce a timetable for established and less-established technology auctions to commence as soon as possible.
3. Ongoing market reform will be essential to support delivery of this plan. The Government should mandate Ofgem to ensure the regulatory regime and market mechanisms create a coherent system that is sufficiently flexible to support cost-effective delivery of the necessary volumes of low carbon generation.

Read the full report - Plugging the Energy Gap

Related content:
Re-examine grid and trading rules to save £5 billion a year on system operation costs, says Policy Exchange

ubscribers: login to read our interviews with:

IEA’s Manual Baritaud “Short-term market prices must reflect more accurately the physical realities of the system and that is particularly true where you have a lot of constraints – which is true in the UK. Unless you do that, system operators will have to take ‘out of market’ actions to manage constraints and imbalance.”

Flexitricity’s Alastair Martin: “Take an asset and give it many things to do –providing a service for Grid, a destressing servce for the DNO, capacity services for all consumers. …If you add in all those sources of revenue ultimately you become the lowest cost resource taken en-masse. If it’s all one trick ponies then ultimately you pay more.”

Exeter University’s Catherine Mitchell: “It was thought that if you have a bilateral market people would make alliances and do interesting things. In practice it’s been used to make it more difficult for competitors to come in and has reduced liquidity.”

Not a subscriber?  Email [email protected] to join our free trail of the  analysis, comment, interviews and data in our monthly report, and access to our database.