1 T r a n s m i tt i n g R e n e w a b l e E n e r g y t o t h e G r i d 2014/1 85059 A KNOWLEDGE NOTE SERIES FOR THE ENERGY PRACTICE THE BOTTOM LINE Transmitting Renewable Energy to the Grid Connecting generating sites to the grid is an obstacle to the Why is this issue important? Second, generation is subject to variability in climate conditions scale-up of renewable energy. (such as wind speed and solar radiation). More extensive trans- Investments in transmission The growth of renewable energy places new mission is also required to smooth out the variability of renewable are often made in response demands on transmission planning sources over a large geographical area so that grid operators can to individual requests for more easily meet demand at all times from a varied pool of energy interconnection from project Many countries are scaling up their investments in renewable energy. sources. developers. But isolated In 2010, electricity production from renewable sources—wind, This note focuses on the transmission implications of the disper- efforts to connect dispersed solar, biomass, biofuels, geothermal, hydropower, and ocean sion of renewable energy sources, rather than on the implications of resources usually turn out to energy—accounted for 18 percent of global electricity supply. By variability. be more expensive than if the early 2011, renewables made up a quarter of all installed power Although transmission accounts for a relatively small percentage full set of planned sites had capacity (Madrigal and Stoft 2011). In the past five years, the number of the final cost of electricity, that share is growing rapidly in power been considered up front. Only of countries that have adopted targets for the incorporation of systems that are ramping up the share of renewable energy in proactive planning, undertaken renewables into their energy mix (or other support policies) has their generating mix. In some subregions of the United States and with a view to maximizing more than doubled, now totaling some 120 countries. But scaling countries in Europe that are pursuing renewable energy options, the efficiency of the overall up renewable resources encounters many challenges, including the the requirements for investment in transmission already approved network, can keep costs increased complexity of balancing system dispatch in the short-term, by regulators (or forecasted by transmission companies) are double and connection delays to a and the need for a strong enabling environment for the promotion of or quadruple recent investment trends. Developing countries face a minimum. renewables through market incentives, policies on the acquisition of similar situation. In Brazil the investment needs for renewable energy land rights, and clearances on social and environmental issues. in some regions surpass the asset value of the distribution utilities One of the main obstacles to the scale-up of renewable energy closest to the renewable sites. is connecting generating sites to the grid in an efficient manner (Madrigal and Stoft 2011). Renewable energy places greater demands on the transmission network than do conventional energy sources. What has been the conventional wisdom? Marcelino Madrigal First, the richest sites for solar and wind energy are often spread The planning process has traditionally been reactive (mmadrigal@worldbank across multiple locations far from consumption centers or existing .org) is a senior energy transmission networks. Unlike with power sources based on fossil Traditionally, transmission needs have been an after-thought to specialist in the World investments in renewable energy plant. Investments in transmission fuels, where planners can choose where to put the generating site, With Bank’s Energy Practice. typically have been made in response to individual requests for the site at which energy from renewable sources is generated affects Rhonda Lenai Jordan interconnection from project developers. Furthermore, the costs of the quality of the resource. In other words, renewable energy sources (rjordan@worldbank.org) extending and reinforcing the transmission network are not always are “site-constrained.” For this reason, transmission networks need is an energy specialist in to be expanded to reach them. split between consumers and providers in a way that supports the same practice. renewable energy development while also protecting consumers; 2 T r a n s m i tt i n g R e n e w a b l e E n e r g y t o t h e G r i d Figure 1. Reactive and proactive planning approaches What is the new evidence? Worldwide experience points to the benefits of planning generation and transmission in tandem Developing efficient transmission networks for renewable energy “Traditionally, transmission requires a new vision. Planning that includes all stakeholders and needs have been an after- takes into account the future development of renewable energy thought to investments in and its associated costs and benefits is emerging as the best way to proceed. renewable energy plant.” Planning can take different forms. It can be performed by a central authority or in a decentralized way. In a decentralized system, policy makers can facilitate negotiation or structure competition to ensure that investment decisions incorporate the costs of transmis- sion. Either way, building transmission costs into plans will ensure that investments in generation minimize overall long-term costs. • Anticipatory planning will design transmission solutions for sets of projects in specific geographical areas, thereby reducing costs and improving efficiency. • Proactive planning goes one step further and uses information on combined transmission and generation costs to ensure that the most cost-effective solution is exploited first to achieve renewable energy goals efficiently. This approach builds into costs are typically borne by the developers. As a result, the traditional the planning process the trade-off between spending more on approach to transmission expansion is not well suited for scaling up transmission and accessing high-quality but remote sites. renewable energy: In addition to planning, proper allocation of the costs of trans- • First, a planning process driven by interconnection requests will mission and sensible network pricing policies have been critical for significantly clog transmission providers’ processes and absorb the fulfillment of renewable energy goals. Cost-allocation policies scarce human resources, leading to delays in the process of and practices have a direct financial implication on renewable energy scaling up and connecting to renewable energy grids. This is projects and can make them more or less attractive. Transmission particularly true given that, for technical reasons, the deployment pricing should be used to send the appropriate signals to genera- of renewable energy projects is typically faster than that of tors so that the results mirror, to the extent possible, an optimum conventional energy and transmission projects. generation and transmission plan. Overall, allocation and pricing • Second, isolated efforts to connect dispersed resources usually policies should be designed to address the specific transmission turn out to be more expensive than if the full set of planned sites challenges and setting in each country. Details on network pricing had been considered up front (figure 1) and if incremental costs and the allocation of transmission costs can be found in Madrigal had been borne by both developers and consumers. and Stoft (2011). The end result is that exorbitant transmission costs threaten the economic feasibility of renewable development. 3 T r a n s m i tt i n g R e n e w a b l e E n e r g y t o t h e G r i d How does this experience affect our thinking? at no cost, the combined transmission and generation cost could well exceed the cost of alternatives, to the detriment of consumers, Proactive planning and transmission pricing are the public purse, and the economy as a whole. critical in scaling up renewable energy Uncovered transmission costs must be allocated broadly. Given the importance of ensuring that the transmission operator Based on the experience being accumulated around the world, “Transmission pricing remains financially sustainable, any shortfall in transmission costs countries that are contemplating a significant scale-up of renewable not recovered by suppliers of renewable energy should be made up should be used to send energy should consider the following recommendations when by increases in tariffs to end-consumers of electricity. Consumers, the appropriate signals making transmission policy: who understand the benefits and costs of improved service, will also Only proactive planning can keep costs and connection times to to generators so that understand the need to pay appropriately for it. Some of the benefits a minimum. In proactive planning, transmission lines are plotted as the results mirror, to of renewable energy do not derive from the energy itself, but rather if the planner had full control of both generation and transmission from avoiding the effects of using fossil fuels. It is not fair to charge the extent possible, an investments, with a view to maximizing the efficiency of the overall only those who use renewable energy for these wider social benefits. optimum generation and network. An intermediate step is to undertake anticipatory planning Consequently, it is logical that some of the additional transmission for specific areas where there is potential for multiple renewable transmission plan.” costs necessitated by renewable energy should be recovered across energy developments, with the more limited objective of minimizing a broader base of consumers . the costs of opening up these areas. Adhering to these general principles by setting up a well-struc- Extra transmission is often worth the cost, but the planning pro- tured proactive planning process and clear and stable cost-recovery cess must be grounded in rigorous analysis. Transmission planning rules greatly facilitates the introduction of private sector investment needs to be grounded in economic analysis that balances the full and participation in the transmission sector. This will be especially costs and benefits of renewable energy development, including both helpful if public funds are scarce and renewable scale-up plans generation and transmission costs. This requires that policy makers require increased amounts of investment in transmission. The determine an explicit value for renewable energy. While the value of planning process should emphasize the collaboration of regulators, renewable sources may well compensate for the incremental costs transmission operators, and generators, and should facilitate and of transmission, full recognition of those costs could alter the ranking maximize the ability to readily connect new sites in a cost-effective of available power supply options. For example, it may be worthwhile way. to connect first to a superior site farther from the grid than to many inferior sites closer to the grid, because the value of the energy supplied by the more distant site may justify the higher transmission costs. References Improved tools for planning are increasingly helpful in Madrigal, Marcelino, and Steven Stoft. 2011. “Transmission Expansion implementing proactive transmission. These include traditional for Renewable Energy Scale-Up: Emerging Lessons and approaches, such as robust or scenario-based planning, as well as Recommendations.” SEGEN Paper 26, World Bank, Washington, innovative tools that use geographic information systems to incorpo- DC. June. rate spatial datasets into the planning process. Transmission pricing is critical to the efficient fulfillment of The peer reviewers for this note were: Luiz Maurer (principal industry renewable energy goals and must be used to ensure (i) that the best specialist, IFC) and Waleed Saleh Alsuraih (senior energy specialist, MENA). The authors acknowledge contributions from Jose Carlos de Miranda Farias resources are developed first and (ii) that excess profits are reduced. (Energy Planning Agency, Brazil) and Luiz Augusto Barroso (PSR-Inc, Brazil). If transmission is not planned at the least cost and, furthermore, if This note is based on original work by Marcelino Madrigal and Steven Stoft. renewable energy generation projects receive transmission services 4 D o y o u h av e s o m e t h i n g t o s ay ? S ay i t i n L i v e W i r e ! MAKE FURTHER Contribute to CONNECTIONS If you can’t spare the time to contribute to Live Wire 2014/2. “Transmitting Live Wire, but have an Renewable Energy to the idea for a relevant topic or Grid: The Case of Brazil,” by interesting case, or would Marcelino Madrigal with Rhonda like to feature findings from a Lenai Jordan Do you have something to say? recent report, let us know! Say it in Live Wire! Live Wire 2014/3. “Transmitting We welcome your ideas Renewable Energy to the through any of the following Grid: The Case of Mexico,” by channels: Marcelino Madrigal with Rhonda Those working on the front lines of energy development in emerging economies have a wealth of Lenai Jordan technical knowledge and case experience to share with their colleagues but seldom have the time to Via the Communities of write for publication. Practice in which you are Live Wire 2014/4. “Transmitting active Renewable Energy to the Live Wire offers prospective authors a support system to make sharing your knowledge as easy as Grid: The Case of Texas,” by possible: By participating in the Energy Marcelino Madrigal with Rhonda Practice’s annual Live Wire • Trained writers among our energy sector staff will be assigned upon request to draft Live Wire Lenai Jordan series review meeting stories with staff active in operations. • A professional series editor ensures that the writing is punchy and accessible. • A professional graphic designer assures that the final product looks great—a feather in your cap! Live Wire aims to raise the profile of operational staff wherever they are based; those with hands-on knowledge to share. That’s your payoff! It’s a chance to model good 2014/4 Texas d: The Case of rgy To The gri “knowledge citizenship” and participate in the ongoing change process at the Bank, 1 TransmiTTing renewable ene where knowledge management is becoming everybody’s business. A KNOWLEDGE NOT E SERIES FOR THE ENERGY PRACTICE Energy to the Grid: Transmitting Renewable 2014/5 lObal energy seCtOr 1 U n d e r s ta n d i n g C O 2 e m i s s i O n s f r O m t h e g THE BOTTOM LINE The Case of Texas states Texas leads the United with 9,528 mw of installed face? wind power capacity—a What challenge did they level exceeded by only four G Ethis E S Einteres case ting? was contingent on A KNOW WhyL E D is NOT RIES FOR THE ENERGY PRACTICE Transmission investment countries. The state needed Texas needed to prioritiz e and accelerate yet needed to precede it more infrastructure to transmit generation commitments wind sites for trans- development of remote meeting tremendous needs Understanding CO Emissions from the Global Energy Sector from electricity generated faced the challenge of Your Name Here THE BOTTOM LINE producer Texas of generation from the was a major triggered by the scale-up renewable sources, but During much of the 2 twentieth century, Texas now taking advantage mission infrastructure take longer to regulator could not approve States. The state is sion infrastructure can the energy sector contributes of petroleum in the United leads renewable sources. Transmis n projects resource: wind. It currently about 40 percent of global transmission expansio of a major renewable energy Why is this ly issue important? power capacity Become an author emissions of CO2. three- in the absence of financial 9,528 MW of installed wind the United States with rs. To solve of the would rank fifth in wind renewable energy zones quarters of those emissions committed generato Mitigating climate 2011) and, knowledge (ERCOTrequires change if it were a country, Figure 1. Texas’s five competitive Figure 2. energy-related CO2 a Figure 1. CO2 emissions come from six major the problem, Texas devised of CO2 emissions generation worldwide. sources that quickly energy program 1999, inby it vowed to sector emissions by country economies. although coal-firedplanning process its When Texas reformed of Live Wire and a energy mix. It now uses LICs energy systems Identifying opportunities to cut emissions of of greenhouse gases les in its plants account for just connects increase the role renewab 0.5% sion system. requires a clear understanding of the main sources of those emis- energy utilities to increase to require 40 percent of world energy to the transmis renewable portfolio standard Other on thedioxide (CO2) accounts for more than 80 percent of leResidential sources. To minimize based n from eligible renewab Other MICs The system is sions. Carbon 6% sectors production, they were their energy generatio created 10% 15% itive gas emissions globally,1 primarily from renewable energy program the burning contribute to your “compet responsible for more than designation of total greenhouse state’s costs to the taxpayer, the to include China Other HICs on the private sector Energy 30% renewable energy of fossil fuels (IFCC 2007). The energy zones. sector—defined energy zones that rely 8% 70 percent of energy-sector competitive renewable 41 n and generatio Industry trans- 41% Japan 4% fuels consumed for electricity and heat generation—contributed ture and operations for emissions in 2010. if warming is to provide infrastruc n, 20% and regulatio n Russia percent of global CO2 emissions in 2010 (figure 1). Energy-related provides planning, facilitatio 7% mission, while the state USA to be limited to two degrees practice and career! Other CO2 emissions at the point of combustion make up the bulk of such transport Road India 19% Celsius, therefore, steep (figure 1). pro- 7% EU emissions and are generated by the renewab fossil fuels, burning of portfolio industrial standard mandated that electricity 6% transport 11% reductions will have to be made The le 16% waste to generate electricity le energy by 2009. waste, and nonrenewable municipal MW of additional renewab in the use of coal to generate Madrigal viders generate 2,000 and leakage emissions years and was followed electricity in the larger and heat. Black carbon and methane venting Marcelino nk This 10-year target was met in just over six Notes: Energy-related CO2 emissions are CO2 emissions from the energy sector at the point d includes international marine and aviation bunkers, domestic (mmadrigal@worldba in this note. the targets mandate andOther Transport are not included in the analysis presented Bill 20, which raised of combustion. economies. .org) is a senior energy up in 2005 by Senate aviation and navigation, n must rail and pipeline transport; Other reach 5,880 Sectors include commercial/public le energy generatio services, agriculture/forestry, fishing, energy industries other than electricity and heat genera- specialist in the World that the state’s total renewab andFurtherm ely. ore, the other emissions not specified elsewhere; Energy = fuels consumed for electricity and Where Bank’s Energydo emissions come Practice. from? MW and 10,000 MW by 2015 and 2025 respectiv tion, in the opening paragraph. HIC, MIC, and LIC refer to high-, middle-, target le energy heat generation, as defined MW of the 2025 renewab With 500 that of countries Emissions are concentrated Rhonda Lenai Jordan in legislatio n a handful required and low-income countries. wind. le sources other than Source: IEA 2012a. (rjordan@worldbank.org) be derived from renewab from burning coal Vivien Foster is sector and come primarily is an energy specialist in Source: ERCOT 2008. manager for the Sus- the Thesame practice. pattern of energy-related CO2 emissions closely geographical middle-income countries, and only 0.5 percent by all low-income tainable Energy Depart- mirrors the distribution of energy consumption (figure 2). In 2010, ment at the World Bank countries put together. almost half of all such emissions were associated with the two (vfoster@worldbank.org). Coal is, by far, the largest source of energy-related CO2 emissions largest global energy consumers, and more than three-quarters globally, accounting for more than 70 percent of the total (figure 3). Daron Bedrosyan were associated with the top six emitting countries. Of the remaining This reflects both the widespread use of coal to generate electrical Contact Vivien Foster: vfoster@worldbank.org works for London energy-related CO2 emissions, about 8 percent were contributed Economics in Toronto. power, as well as the exceptionally high CO2 intensity of coal-fired by other high-income countries, another 15 percent by other Previously, he was an power (figure 4). Per unit of energy produced, coal emits significantly energy analyst with the more CO emissions than oil and more than twice as much as natural 2 World Bank’s Energy Practice. Gas Inventory 1 United Nations Framework Convention on Climate Change, Greenhouse 0.php gas. Data—Comparisons By Gas (database). http://unfccc.int/ghg_data/items/380