Project Summary
SIF Innovation Challenge: whole systems integration. INCENTIVE will meet the aims of this challenge as set out in the answer below.
INCENTIVE will enable low-cost future-fit networks that support net zero goals, by seeking to bring innovative “INCENTIVE solutions” to market.
Discovery found that doing so requires a whole-systems approach to the innovation. INCENTIVE is improving coordination between networks, generators, suppliers, policy makers and regulators, by collaboratively investigating INCENTIVE solutions, with a view of developing a path to commercialisation. The large consortium (including nine Offshore Wind Farm (OWF) developers and networks) and the range of INCENTIVE solutions proposed provides an optimum approach avoiding duplication of this work. Technology requirements are being developed that will reduce variation in the INCENTIVE solutions’ capabilities. Complexity and bureaucracy for the INCENTIVE solutions are being reduced by studying regulation, whilst barriers to entry are being reduced by studying their value to the consumer and technical capabilities.
Discovery has evolved our understanding by finding a range of innovative solutions that could be used to strengthen the stability of the network. These are the following, located at the point of grid connection of an OWF. The technologies, combined with their implementation at the point of OWF connection, are termed “INCENTIVE solutions” in this application:
· grid-forming battery energy storage systems (BESS). This would replace a traditional STATCOM at the onshore substation of an OWF. Some grid-forming BESSs have been deployed before on the GB grid; however, their implementation as a replacement of the STATCOM of an OWF (which has commercial and technical complexity) has not yet been demonstrated;
· grid forming STATCOM (including super capacitor energy storage). This would replace a traditional STATCOM at the onshore substation of an OWF. This is novel technology that has not yet been used at the connection of OWFs to the onshore GB network;
· synchronous condenser. This could be placed at the onshore substation of an offshore wind farm. Synchronous condensers are not novel technologies. However, their use at the onshore points of connection of an offshore wind farm (which has commercial and technical complexity) needs to be evaluated, to ensure that the more innovative technologies demonstrate clear benefits;
· updated HVDC terminal capable of providing inertia. This would replace a standard HVDC terminal (not uprated, not capable of providing inertia) at the onshore connection point of an HVDC-connected OWF. This is novel technology that has not yet been used at the connection of OWFs to the onshore GB network.
Discovery has:
· shown commercial potential for INCENTIVE solutions;
· developed testing requirements to prove INCENTIVE solutions’ capabilities; and
· identified knowledge gaps regarding the commercial and technical implementation of INCENTIVE solutions, which need to be examined further before INCENTIVE solutions can be commercialised.
Partners
Discovery found that, to address the needs of all INCENTIVE solution users, market, technical, regulatory, commercial and market innovation is required to happen simultaneously. INCENTIVE therefore needs cooperation between network companies, generators and technical experts. The partnership brings together all these necessary stakeholders through SSEN-T, NGESO, Strathclyde University, and Carbon Trust (representing the nine OWA developers). By developing simple regulatory, commercial and market frameworks for OWFs to provide stability services, INCENTIVE will benefit the whole system and all stakeholders in the energy system.
Users
Network owners will use INCENTIVE solutions to facilitate stable connection of offshore wind farms to their networks. System Operator (ESO) will procure INCENTIVE solutions to provide stability services. INCENTIVE solution owners will use INCENTIVE solutions to reduce OWF curtailment. Consumers will also benefit from the integration of INCENTIVE solutions through the increased access to fossil-fuel free generation.
Innovation Justification
The fundamental problem INCENTIVE aims to address is decarbonising the energy system in a low-cost manner. Specifically, INCENTIVE is seeking to address the problem of maintaining network stability following the replacement of traditional fossil fuel synchronous generators with non-synchronous renewable generators (such as OWFs). Solving this problem is of great importance to the energy sector, as it will help to unlock future renewable development by enabling them to provide services that traditionally have not previously been possible from non-synchronous generators. INCENTIVE aims to deliver value to all users, by enabling lower cost connection of renewable generators with increased capabilities in comparison to business as usual (BAU), see next question for more details on benefits.
In previous work (prior to INCENTIVE), compelling opportunities were found to address the above problems, through the innovative implementation of technologies deployed at the point of OWF connection to the onshore network. However, there are significant risks in the implementation of these technologies, inhibiting their deployment. It is these risks that INCENTIVE is aiming to resolve.
This previous work was further developed in Discovery, which found that commercial uncertainty (e.g. around technology costs, revenues and regulation of INCENTIVE solutions) exists. Further, Discovery found that technical uncertainty (e.g. the performance of INCENTIVE solutions on the network) exists.
These risks need to be addressed in Alpha and Beta to allow INCENTIVE solutions to become commercial realities. The complex technical, commercial and regulatory barriers result in too much uncertainty for this technology to be invested in as BAU for OWF developers or elsewhere in the price control for networks. Currently, some INCENTIVE solutions simply cannot be procured since technical innovation is required, whilst some INCENTIVE solutions cannot be procured due to uncertainty in ownership restrictions. Innovation funding is therefore required to take a whole system integration approach, by maturing the technology in parallel with commercial and regulatory aspects.
Without INCENTIVE continuing to Alpha and Beta, INCENTIVE solutions will risk not being brought to market in the accelerated manner necessary to meet the 2030 50GW offshore wind targets. This will in turn mean that the connection of new renewable generators (such as OWFs) is more costly, or in the extreme may not be possible, and may require additional gas turbines to be deployed to provide system stability. This will increase the cost of, and slow down, the energy transition, and increase the UK’s reliance on energy imports.
Benefits
INCENTIVE has the aim of delivering system stability at lower cost than BAU. Whilst ambitious, this is achievable by focussing the project on bringing novel INCENTIVE solutions to the market. By assessing a range of options under the umbrella of a single project, INCENTIVE aims to identify and address common technical, regulatory, and commercial barriers to adoption of these grid stability providers. This coordination will reduce duplicated effort, thereby accelerating the adoption of INCENTIVE technologies as BAU stability providers.
The benefits of successful development and marketing of INCENTIVE solutions have been assessed in Discovery. Using a metric aligned with financial benefit to the consumer, this work found that all INCENTIVE technologies have positive business cases in comparison to BAU.
In BAU, grid stability is predominantly provided by combined cycle gas turbine (CCGT) generators - which often run out of merit at the expense of curtailing cheaper, zero-carbon renewable generation such as wind. The introduction of INCENTIVE solutions can reduce the reliance on CCGTs and reduce renewable curtailment. The benefits of non-emitting stability provision, such as INCENTIVE solutions, include:
· Savings on consumer energy bills: NGESO estimates that use of out-of-merit CCGT will cost around £470m a year by 2026 without mitigating action. Some reduction in this is likely in the medium-term as NGESO’s Pathfinder project introduces new types of stability provider, but beyond a 5-year timeframe, significant additional sources of stability need to be developed to support continued growth in renewable generation.
· Helping meet UK government CO2 reduction targets: INCENTIVE will drive large reductions in CO2 emissions, both directly through eliminating use of CCGTs as stability providers, and indirectly through facilitating higher penetrations of renewable generation. INCENTIVE solutions will be an essential component in achieving 50GW offshore wind by 2030, 100% decarbonised power system by 2035 and net zero by 2050.
· Increase UK energy independence: by supporting provision of adequate stability reserves, INCENTIVE technologies will reduce the need for energy imports and assist with local and national energy supply resilience.
Discovery Phase business case assessment investigated the net present value (NPV) of individual INCENTIVE solutions. The assessment assumed that the grid is agnostic to the technology that is providing the stability, and that the appetite for avoiding the significant disbenefits to the UK of weak system stability remains unchanged going forward. Project lifetime costs were compiled from estimates of capital investment and running costs. Benefits have been monetised by approximating their value using market price information emerging from the NGESO Pathfinder tenders.
In Alpha, the scope of costs and benefits considered quantitatively will be expanded to include assessment of relative environmental impacts of INCENTIVE options, benefits to the ESO (financial and system reliability) and the financial benefits that would accrue to INCENTIVE technology asset owners. This will include an examination of the impact that regulation and ownership will have on investment attractiveness.
Full details of the relative benefits of different INCENTIVE options can be found in the Discovery WP1 report, which is a business case report for various technologies and is included as an appendix to support this answer. The Discovery CBA model can also be provided if required by assessors.
Impacts and benefits
The commercial assessment found positive economic cases for INCENTIVE solutions. In essence, this means that INCENTIVE solutions can provide inertia at lower costs than existing sources, which will reduce the cost of grid stability to GB consumers.
From a whole system perspective, the lowest cost way to add inertia to the grid is through incremental additions to assets that are already planned for other purposes (such as reactive power provision, short circuit level (SCL) or energy storage). Therefore, the options with the highest benefit-cost ratio (BCR) and lowest cost of inertia are all derived from marginal changes to the three broad INCENTIVE solution options described below.
Installing a STATCOM with additional energy storage from supercapacitors could provide a low-cost route to delivering increases in inertia. Given the requirement for a STATCOM at all AC connected windfarms to provide reactive power compensation, this option has the potential to deliver distributed inertia across the grid, without competing with the standard function of the STATCOM.
The addition of a flywheel to a synchronous condenser is another incremental change that provides low-cost additional inertia. In locations where requirement for SCL is high and hence a synchronous condenser is required, adding a flywheel is likely to be the most economically favourable action to provide inertia.
Using an over-rated grid-forming converter in a battery system, allows the battery to provide inertia without curtailing its ability to provide active power services, such as arbitrage and dynamic containment. This is another example of where a relatively low-cost upgrade to an already-planned asset can provide abundant, low-cost inertia.
Moving away from the whole system perspective, and focussing on the onshore substation of an offshore windfarm (which, for an AC-connected windfarm, will include a regular STATCOM for reactive voltage regulation purposes), the CBA findings indicate that:
The STATCOM-plus-energy-storage is an economically attractive solution, with a positive NPV, (relatively) low capital cost and large potential savings per unit of inertia, relative to procurement via a long-term market. If implemented at every new STATCOM, there is the potential for 30-year whole network savings of the order of £1billion.
The synchronous condenser cannot provide the fast voltage control response and filtering capability as effectively as a STATCOM, and so it is assumed it cannot fully replace the functionality of a STATCOM. It can however be sited at the onshore substation, which could provide savings in terms of grid connection and other development costs when compared with a stand-alone installation at a new site.
It is possible to use a battery to replace the functionality of a STATCOM. This “BAT-STAT” implementation saves on the costs of the STATCOM. However, the CBA analysis has shown that these savings are not sufficient to compensate for the revenues lost to the BAT-STAT through having to provide the reactive power services required of STATCOM. Unless there are additional benefits to windfarm performance that can be accessed through using a battery as a STATCOM, the best implementation for a battery would be co-located on the substation site (in addition to the regular STATCOM), to reduce development costs, and to have an over-rated converter.
The battery system presents the greatest flexibility in terms of specifications and deployment scenarios. The CBA has highlighted the following:
Battery systems have the capability to stack services. The apportionment of converter capacity between the stability and active energy services has implications for the battery’s revenue levels and, when a day ahead stability market is launched, potentially for linking the behaviour of prices within this and day-ahead power markets. Revenue optimising behaviour is related to the levels of prices within the markets, and to the ratios in which the service can be offered, which is determined by the physical process by which the battery supplies inertia.
Using current price estimates, the greater costs of longer-duration battery storage are not met by the likely increases in revenues that they bring. Both stability and dynamic containment provision depend on the battery’s power rating, hence revenues from these sources do not depend upon the energy storage capacity of the battery. Therefore, using a short duration battery is most favourable.
The battery solutions are notably worse in terms of environmental impact than either the STATCOM based solution or the synchronous condenser. This stems from the embedded carbon within a lithium-ion battery, the need for replacement of the battery at least twice within the project timescales, and the poor environmental footprint of lithium mining.
Further detail can be found within the attached INCENTIVE Alpha Phase Summary Report.
