Cost of backing up solar is ‘negligible’

The cost of backing up solar generation and integrating it into the energy system is “negligible”, a report commissioned by the Solar Trade Association has found. At just £1.30/MWh it represents less than 2 per cent of the current cost of solar generation.

Tripling the volume of installed capacity in the UK to 40GW – enough to meet 10 per cent of the country’s annual electricity demand – would only raise the cost of managing variability to £6.80/MWh.

The majority of this cost would go towards backup generation secured via the capacity market. In the central scenario – whereby 40GW of solar is installed by 2030 – this would reach £4.5/MWh. The report estimated the current cost at £2.5/MWh based on the amount paid by National Grid for the Supplemental Balancing Reserve.

Then there is the cost of short-term balancing within the 30 minute blocks in which energy is sold. The extra generation required as backup for solar would have the “useful side effect” of reducing the cash out price in the balancing mechanism. This would mean by 2030 the cost of balancing would actually be £-0.70/MWh.

Finally, there is the cost of the “timeliness of delivery”. As much of it is generated during peak summer afternoon periods, solar power is currently worth on average £1.20/MWh more than the baseload price. However, by 2030 “so much power is delivered at these times” that it would typically be worth £3/MWh less.

Combining these three costs gives you the £6.80/MWh total. The analysis by Aurora Energy Research does not include the costs of reinforcing distribution and transmission networks, although developers already bear some of these costs themselves.

Source: Aurora Energy Research

The central scenario assumes that installed wind capacity will stay static at the current level of 16GW. However, in an alternative scenario in which 45GW is installed by 2030, the cost of managing intermittency would fall by around a quarter to £5.1MWh. “This demonstrates the benefit of a diverse renewables portfolio, as solar and wind deliver their output at different times,” the report said.

It also assumes that the government will press ahead with new nuclear, with Hinkley Point C completed in 2027 and subsequent projects delivered two years behind schedule. Nuclear is generally inflexible and designed to run for more 90 per cent of the time: “While some forms of nuclear technology can technically ramp down at short notice, the reality is they are extremely reluctant to do so.”

If instead, no nuclear was built and combined cycle gas turbines were installed to provide backup capacity, the cost of solar intermittency would fall to a mere £3.1/MWh, “more than halving the cost”.

The most striking improvement, however, would come with the large scale deployment of battery storage. “The prospects for grid-scale energy storage have recently become significantly more promising,” the report said.  “This has been driven primarily by substantial decreases in the cost of lithium ion batteries, to the point where the investment case for batteries for a wide range of applications is likely to be viable in the next five years.”

Aurora estimated that if battery costs fall to £100/kWh by the early 2020s, as current trends suggest, then installed capacity could reach as much as 8GW by 2030. If this did happen, the cost of intermittency for solar generation would be £-3.7/MWh, meaning it would actually have a net benefit for the energy system.

“Batteries and solar are a complementary combination, with batteries improving the capture prices of solar, and solar creating a generation profile whereby batteries can profitably store and then deliver to the market as needed,” it added.

Chief executive of the Solar Trade Association Paul Barwell said: “Solar is an enabling technology which brings down the cost of integrating wind and battery systems.”

“We are on the cusp of an incredibly exciting technological transformation in the power system that the new [Department for Business, Energy and Industrial Strategy] has an exceptional opportunity to drive forwards.”

“This welcome research puts numbers and maths behind the variability of solar power,” said chair of the Energy and Climate Change Committee Angus MacNeil. “It gives a concrete understanding of what solar has to offer compared to other technologies. Combined with reducing capital costs solar is going to be as cheap as source of power as you’ll find anywhere.”

Chair of the Energy Transitions Commission Lord Turner said: [The report] confirms what an increasing number of analyses are now telling us – that we can build electricity systems with high shares of renewables such as solar and wind, using lower cost batteries, other storage technologies and demand management to deal effectively with intermittent supply.

“We should not be holding back from further renewables investment out of fear that we can’t keep the lights on.”