With the adoption of ambitious CO2 emissions targets to curb the negative effects of climate change, energy systems around the world are in transition. Yet as the output of variable renewable energy rises, it brings with it new risks and the need for a redefinition of the concept of energy security.
A new report from the EU-China Energy Cooperation Platform aims to strengthen the understanding of energy security in China and the EU in the context of the energy transition. Recent extreme weather events and geopolitical tensions have laid bare the vulnerabilities of energy systems throughout the world. Both China and the EU have had to respond rapidly to changeable weather patterns and to energy supply disruptions, and they now face a future where variable renewable energy sources will need to be offset by measures to ensure that households and industries can be assured of a stable energy supply.
This report offers a quantitative assessment of the risks associated with dependence on large-scale variable renewables in the power system, which necessarily rely on variable weather and global temperatures.
The risks to energy security are apparent: with the onset of the conflict between Russia and Ukraine in 2022 and the resultant sharp reduction to natural gas supplies from Russia, global oil and gas prices spiked and the EU was forced to respond rapidly with its REPowerEU policy, designed to ramp up renewables and diversify energy supplies. In China, the lack of interconnectivity in its power grid meant that weather fluctuations led to significant power outages in 2022, with unpredictable wind and solar energy failing to generate the required power for industries and households. China also fell victim to the volatility in 2022 and found itself ramping up coal-based power generation to bolster supplies despite its net zero objectives.
The report argues that sharing of expertise on methodologies for resource adequacy and power system planning offers the potential for energy savings and efficiencies as well as economic trading benefits, CO2 reductions and reduced curtailment of VRE.
As power demand rises, transmission integration is becoming more a pressing issue in the EU and China. The EU prioritises cross-border cooperation and solidarity among Member States with a functioning electricity market. In China, transmission system integration extends beyond physical capacity and requires a market-led approach: the report contends that such an approach to transmission expansion could achieve significant CO2 reductions and reduced curtailment of VRE.
The authors offer a comprehensive overview of the multitude of risks to energy security in systems that rely heavily on VRE or on carbon offset technologies, or that are transitioning to cleaner energy.
The report highlights the risk that carbon offset technologies may dominate China’s transition and so limit moves to develop grid integration, so limiting transmission expansion. Its authors argue that China needs to base its transition mainly on renewables, and should introduce more flexible inter-provincial transmission which can adapt to the seasonal characteristics of resources in different regions. China’s vast terrain emcompasses hot, cold and temperate climates, where energy resources vary widely.
The authors point out the risks posed by lack of flexibility in the energy system, and the need for efficient transmission to balance VRE generation. The flexibility risks are found to be both short duration (balancing the system within the day to ensure system stability) and long duration (during periods with shortage of wind, solar and hydro generation).
The authors argue that adoption of a resource adequacy assessment framework which explicitly accounts for the variability of weather conditions, allows a more accurate prediction of the impact on VRE generation and demand. The EU’s revised framework has a 10-year horizon and uses different scenarios, adding an uncertainty component into its assessment, as well as planned outages. China employs a different method to assess power adequacy, taking into account demand forecasts, including peak and off-peak periods, but as yet it does not include weather patterns.
It is clear from the report that delays to grid development carry enormous risks. The IEA has illustrated this by comparing countries ‘announced pledges scenario 2020-50’ with a scenario with delayed grid development. The comparison demonstrates that delays to development result in between 15% and 20% less PV and wind being able to connect to the grid by 2050.
In terms of technology, the authors highlight the complexity of ‘phasing in’ new technologies and ‘phasing out’ traditional ones. Decisions about the pace and timing of such developments are unenviably difficult. Early retirement of infrastructure can aggravate or even create energy security issues. Adequate storage capacity is essential for managing the fuel substitution, the authors caution. They cite the examples of China and Germany, who faced a shortage of generation capacity when they needed it, as a result of their hasty coal phase-out.
The authors also call for cooperation on technologies, particularly relatEing to CCS and P2X. Such technologies are expensive and energy intensive, and require critical raw materials that may not be easily obtained, and that carry the risk of geopolitical tension if access to them is controlled by a particular group or nation. Without cooperation between countries and companies, innovation could be piecemeal, with an associated impact on the clean energy transition.
The report offers a detailed analysis of the effect of weather patterns on VRE resources in China and the EU, drawing on scenarios developed by the China Electricity Council and the European Network of Transmission System Operators. They find that regions with a high share of solar PV generation need greater daily flexibility, while regions dominated by wind need more flexibility on a weekly basis.
In their conclusions, the authors point out the relative advantages and successes of the EU and China with regard to energy security. The design of the electricity market in the EU mitigated the impact of the recent energy crisis. It meant that a rapid and effective response was possible when oil and gas prices spiked and energy supplies were threatened. The bloc is now introducing a reform to the electricity market which will make prices less dependent on volatile fossil fuel prices, decrease the investment uncertainty in electricity market and accelerate the build-out of home-grown and competitive renewables.
Meanwhile, China has access to critical raw materials that are vital to the green transition, and plays a major role in EV, PV systems and wind and electrolyser installations. It has successfully diversified its fuel imports and is continuing to develop its own supplies of oil, gas and coal. The report identifies as a priority the need for China to align wholesale market price fluctuations with consumer prices in order to ensure flexibility and efficiency in China’s energy transformation, and to provide stability of supply to industries and households.