At a glance
I’ll Have What They’re Having: Lessons learned from six jurisdictions leading in wind and solar deployment, by Will Noel, Lia Codrington and Scott MacDougall. Pembina Institute, Dec. 5, 2024.
This Pembina Institute report analyzes six global leaders in the integration of solar and wind — California, Texas, Ireland, Germany, South Australia and Denmark — to identify effective strategies for incorporating variable power sources into electricity grids. It compares these jurisdictions with Alberta, which is Canada’s largest producer of oil and natural gas. The province has also been a leader in renewable energy intallations, although recent regulatory restrictions have delayed projects and created uncertainty for investors. The findings in this report show high renewable penetration is feasible across diverse climates and grid sizes. Key insights include the importance of developing both wind and solar resources, leveraging rooftop solar and enhancing grid flexibility through energy storage and interconnections.
It dispels myths linking high renewable generation to increased energy prices or reduced reliability. Denmark, Germany and Ireland successfully integrated large amounts of renewable energy into their power grids between 2014 and 2019. They maintained high grid reliability that exceeded the regional average for system disruptions. South Australia, which uses 71 per cent wind and solar energy, has seen its electricity prices decline relative to 2017 despite an increase in gas prices. These compelling examples offer practical lessons for other jurisdictions, while showing the importance of strategic market design, transmission system planning and supportive regulations for a smooth transition that cuts electricity prices and emissions.
Key findings
- Universal viability of high renewable energy penetration: Jurisdictions ranging from South Australia (1.8 million people) to Germany (83 million people), have successfully achieved renewable energy penetration rates of up to 71 per cent. Extreme temperatures, from summer in Texas to winter in Denmark, are also not barriers to scaling renewables.
- Wind and solar are complementary: These resources provide balanced energy production, with wind typically peaking when solar is unavailable, and more abundant solar when wind levels fall. This occurs diurnally (it’s usually windier overnight when there is no sunlight) and seasonally (with solar dominating summer months but overtaken by wind during the winter). Though variation exists, this appears to exist in some capacity everywhere.
- Storage and interconnections enable higher renewable penetration: Energy storage allows for wind and solar generation shifting to match demand. Inter-regional transmission lines make it easier to share surplus renewable energy between jurisdictions. All six regions use a combination of energy storage and interties, enhancing grid flexibility and permitting higher renewable penetration.
- Reliability is achievable with high integration of solar and wind: Denmark, Germany and Ireland maintain exceptional grid reliability with some of the highest renewable generation in the world. Denmark produces 65 per cent of its electricity from wind and solar and achieves 99.9 per cent electricity availability.
- Renewables do not increase electricity prices: Wholesale power prices are influenced by various factors, including market structures, regulations, weather, fuel costs, demand fluctuations, and power plant availability. South Australia and Texas have maintained lower or stable electricity prices alongside rising wind and solar generation.
- Rooftop solar can play a significant role: Forty per cent of South Australian homes have rooftop solar. They supply nearly 20 per cent of the state’s electricity needs. By generating electricity where it will be used, rooftop solar also helps reduce line losses, congestion, and transmission costs without new land or transmission development.
Take a look
Source: Pembina Institute (2024), I’ll Have What They’re Having.
Bigger picture
Alberta has been at the forefront of renewable energy development in Canada, despite being known internationally for its oil and gas production. The combination of strong wind and sunshine, as well as a decentralized power market, fueled investments in renewables to the point where 17 per cent of Alberta’s electricity came from wind and solar energy in 2022. That same year, the province was home to three-quarters of new renewable energy projects in Canada. Progress was disrupted in August 2023 when Alberta announced a pause on approving any new wind and solar energy projects greater than one megawatt pending a review by the Alberta Utilities Commission into concerns such as the impact on agriculture, the environment and scenery, as well as reclamation and the reliability of the grid. The moratorium ended in February, but the province brought in other restrictions that could deter investment and limit future growth of renewables in Alberta. Another report from the Pembina Institute released in August identied 53 projects that withdrew applications from Alberta’s electricity grid development process. The moratorium was brought in alongside concerns over system reliability, with the Alberta Electric Systems Operator having issued several grid alerts, sometimes tied to wind conditions, asking residents to conserve power.
This new report by the Pembina Institute shows how other jurisdictions have addressed the variability challenges of wind and solar by increasing energy storage capacity to improve grid flexibility. This includes storage of both short duration, namely batteries, and long duration, such as pumped hydro. They also show the value of developing inter-regional transmission lines (interties) connecting jurisdictions. Interties make it easier to trade low-cost wind or solar from high-generation, low-demand areas to low-generation but high-demand areas in exchange for imported power at later dates. Consider the example of California, which used to have to ask residents to conserve energy during heat waves much like the grid alerts in Alberta. Over the past two years, California added more than 11,000 MW of clean energy to its grid, expanded its battery fleet to nearly 10,000 MW and chose not to ncrease its gas-fired generation. This allowed the state to successfully handle record-breaking demand during a heat wave this summer, while also exporting surplus electricity. Texas, one of the only U.S. grids operating in isolation, has the most power outages in the country.
Some critics argue increasing renewable penetration leads to higher power prices. But this report shows that most electricity markets set their prices on the most expensive dispatchable source, usually natural gas. This is why gas-dependent regions like Europe have recently seen sharp rises in electricity prices due to geopolitical instability resulting in higher natural gas prices. In Texas and California, which enjoy low gas prices, substantial increases in wind and solar have nevertheless contributed to lower power prices. Meanwhile, South Australia’s electricity prices fell despite a clear increase in gas prices, thanks to its significant solar energy generation. Between 2020 and 2021, 61 per cent of power price increases in Alberta were due to lack of competition. A small number of gas-fired generators were controlling 80 per cent of dispatchable power. Recent electricity price declines are attributable to increased competition driven by two large, new gas-fired units, and several new solar and wind facilities.
Challenges and opportunities
Key barriers to energy transition progress:
- Insufficient grid flexibility: Limited energy storage, inadequate interconnections, and outdated infrastructure restrict greater integration of solar and wind. Alberta’s intertie and storage capacity is only 4 per cent of total generation capacity. This constrains its ability to manage high renewable penetration and contributes to a recent sharp rise in emergency grid alerts.
- Regulatory and market uncertainty: Alberta’s renewable energy moratorium, which saw 53 projects representing 8.6 GW of potential generation capacity withdraw their applications since last year, and restrictive policies deter investment. High levels of regulatory and market uncertainty push developers to invest in other markets.
- Dependence on fossil fuels for ancillary services: Ancillary grid services are processes to maintain power system stability, ensuring reliable electricity transportation by regulating frequency, voltage, and power load within safe operational limits. Though coal, natural gas and hydroelectric power plants historically supply this, as grids incorporate more wind and solar, more flexible and agile services are needed.
- Misaligned economic incentives: The dominance of fossil fuel generators and lack of competition inflate electricity prices and hinder clean energy adoption.
- Technology and adoption challenges in extreme climates: Hot and cold regions face unique difficulties. The former involves navigating peaks of high temperatures necessitating the abating of thermal generation facilities. The latter requires adapting to cold temperature peaks, usually at night.
- Consumer participation gaps: Limited uptake of technologies like rooftop solar reduces opportunities for distributed generation and local resilience.
To address these challenges, the report recommends:
- Investment in grid modernization and flexibility: Expanding energy storage, inter-regional interties, and demand-response systems enhances grid reliability. It helps prepare for greater proportions of variable renewable energy generation.
- Enhanced policy frameworks for renewables: Policymakers must establish stable, long-term renewable energy targets and market designs that provide the stability and certainty conducive to attracting investment.
- Collaborative innovation for ancillary services: Transitioning from fossil fuels to cleaner technologies to improve grid stability is essential. Industries should prioritize batteries, synthetic inertia, and demand-side solutions over traditional large mechanical systems, such as coal, natural gas, and hydroelectric power plants, to cost-effectively meet changing ancillary service needs.
- Diversified renewable energy portfolios: Encouraging a mix of wind and solar ensures better seasonal and daily energy balance. Policymakers should invest in complementary projects for maximum efficiency.
- Regional and international energy collaboration: Building cross-border interconnections can enhance resource sharing and create a crucial buffer for systems with high levels of variable energy. Emerging economies could adopt similar cooperative strategies as seen in Europe’s 2030 15 per cent intertie target which demands all member countries build sufficient intertie capacity to transport 15 per cent of the electricity they produce to other countries.
- Decentralized renewable solutions: Incentivizing rooftop solar energy uptake can empower consumers to produce their own energy and reduce reliance on centralized power plants. This decreases demand on transmission infrastructure and can greatly lower consumers’ energy bills.
In their own words
…there does not seem to be a simple relationship between the mix and amount of flexibility boosting technologies and level of renewable penetration achieved. For example, California and Texas met around 32-33 per cent of their electricity demand with wind and solar over the past 12 months but have significant differences in intertie, energy storage, and demand-response capabilities. Rather, we find that there are a range of pathways through which an electricity grid can increase flexibility to enable a higher build out of renewables.
I’ll Have What They’re Having: Lessons learned from six jurisdictions leading in wind and solar deployment, by Will Noel, Lia Codrington and Scott MacDougall, Pembina Institute, Dec. 5, 2024.
Final thoughts
Electricity grids will need extensive expansions and improvements to manage the levels of variable renewable energy sources needed to reach net-zero emissions targets. The success stories highlighted in this report could help policymakers and stakeholders guide the planning and development of their electricity systems. They could also look to the International Energy Agency’s recent report, which warns that by 2030, up to 15 per cent of solar and wind energy generation could be lost without proper integration measures, reducing the power sector’s emissions cuts by 20 per cent.
Missing from this report is how advanced grid digitalization or artificial intelligence could modernize and improve grid flexibility. There is ample evidence that smart buildings using AI can help reduce demand on grids through higher energy efficiency and reducing or shifting their loads during peak demand. Electric vehicle (EV) batteries can also complement renewable energy generation by offering flexible short-term storage. This could be from EVs with vehicle-to-grid capabilities (as seen in a recent Canberra trial) or from repurposing end-of-vehicle-life batteries. It is also worth mentioning that achieving net zero involves the electrification of fossil-fuel technologies and processes like internal combustion engines and gas boilers. As these replacements are usually more efficient, they reduce energy demand so electrification, predominantly powered by wind and solar, will mean the need for less energy overall. All of these factors are equally relevant to Alberta as to any other grid. Governments should take note of these recommendations to facilitate greater renewable energy deployment and integration.
Download the full report originally published by the Pembina Institute on Dec. 5, 2024.
