The mid-transition in the electricity sector: impacts of growing wind and solar electricity on generation costs and natural gas generation in Alberta

Abstract

In response to climate change, electricity grids are decreasing their carbon intensity with the addition of wind and solar variable renewable energy generation (VREN). This leads to a mid-transition period, where renewable energy is unable to satisfy electricity demand without contributions from other fossil sources such as natural gas, but also generates sufficiently to constrain conventional generation—changing their operating and market conditions. We use a simplified copper plate model, which scales up and down historical wind and solar generation, to examine how and when the patterns and generation costs for fossil fuel power could change by the increasing capacities of VREN on the relatively isolated Alberta electricity grid. We find that beginning at 20% VREN an increasingly diverse range and reduced hours of dispatched capacity is necessitated from the existing generation. However, even as capacity factors for fossil fuel generation decrease their costs remain reasonable and we found this to be a low-cost pathway for achieving moderate to deep emission reduction goals. A full 86% of demand could be met with VREN before generation costs exceeded 100$/MWh, allowing for an emissions reduction of 28.4–9 million tonnes yr−1 of CO2eq, on a lifecycle basis. In order to integrate the renewable generation, new and existing fossil fuel units will require market rules that incentivise flexibility and ensure they remain in place throughout the transitionary period as they are crucial to balance variable renewable generation.