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What China, Germany, and Texas tell us about Capacity Adequacy
(Energy Post, 30 Apr 2024) As intermittent renewables penetrate further into the grid mix, reliable firm power generation is needed for whenever there is a shortfall. But back-up power, by its nature, has unreliable utilisation rates. And up-front costs for new plants are high, be they gas-fired plants, coal, nuclear, or large-scale storage
That makes future profitability uncertain, and private investors nervous. Hence the need for “capacity mechanisms” that guarantee additional payments to the back-up plant, making the investment financially viable and the grid stable. Cy McGeady at CSIS looks at how Germany, China and Texas are dealing with the issue, and what they can learn from each other. “Capacity adequacy” procurement will inevitably become a growing concern for policy makers, wherever they are, as the penetration of intermittent wind and solar continues apace.
A brief step beyond the confines of the U.S. electric power sector delivers an interesting perspective on domestic developments.
[In February], Germany approved an updated power plant strategy which will procure 10 gigawatts (GW) of gas-fired power generation in the coming years through roughly $17 billion in subsidies. Though the power plants are to be hydrogen-ready, they will burn natural gas over the near term. The plan also envisions a new technology-neutral capacity payment mechanism to be introduced by 2028 which would allow other resources like battery storage or wind to compete with the new plants for capacity payments. Nonetheless this competitive capacity mechanism will likely channel additional funds to the new plants.
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Energy Post, 30 Apr 2024: What China, Germany, and Texas tell us about Capacity Adequacy
