Renewable energy is expected to grow significantly in the coming years.
Hawaii, for example, plans to generate 100% of its electricity from renewable sources by 2045.
The high penetration of variable renewables requires a high degree of flexibility on both the supply and demand sides of the electricity market:
- Energy storage
- Construction of more transmission lines
- Combination of different renewable energy sources
- Demand Management
- Valuation of the flexibility of generators
Renewable energy is paving the way for a low-carbon future, but the impact of its intermittency on the existing grid cannot be ignored. It will take advanced technology, careful planning and increased flexibility to ensure a smooth transition to a renewable energy-dominated electricity system.
Geothermal energy is heat derived from the earth’s subsurface.
Water and/or steam transport geothermal energy to the Earth’s surface. Depending on its characteristics, geothermal energy can be used for heating and cooling or harnessed to generate clean electricity.
However, generating electricity requires high or medium temperature resources, which are generally located near tectonically active regions.
This essential renewable source covers a significant portion of electricity demand in countries such as Iceland, El Salvador, New Zealand, Kenya and the Philippines and more than 90% of heating demand in Iceland.
Its main advantages are that it is not dependent on weather conditions and has very high capacity factors; for these reasons, geothermal power plants are capable of providing base load electricity, as well as providing ancillary services for short and long term flexibility in some cases.
The use of bioenergy can be divided into two main categories: “traditional” and “modern”.
Traditional use refers to the burning of biomass in forms such as wood, animal waste and traditional charcoal.
Modern bioenergy technologies include liquid biofuels produced from bagasse and other plants, biorefineries, biogas produced by anaerobic digestion of residues, wood pellet heating systems and other technologies.
Biomass has great potential to boost energy supply in populous nations with growing demand, such as Brazil, India and China.
It can be burned directly for heating or electricity generation, or converted into oil or gas substitutes.
Liquid biofuels, a convenient renewable substitute for gasoline, are used primarily in the transportation sector.
Brazil is the leader in liquid biofuels and has the largest fleet of flex-fuel vehicles, which can run on bioethanol – an alcohol produced mainly by fermenting carbohydrates in sugar or starch crops, such as corn, sugarcane or sweet sorghum.
Hydroelectricity is energy derived from flowing water.
More than 2,000 years ago, the ancient Greeks used water power to turn wheels to grind grain; today, it is one of the most cost-effective ways to generate electricity and is often the preferred method when available. In Norway, for example, 99% of the electricity comes from hydroelectricity.
The largest hydroelectric plant in the world is the Three Gorges Dam in China, which produces 22.5 gigawatts. It produces 80 to 100 terawatt-hours per year, which is enough to supply between 70 and 80 million homes.
Small-scale micro-hydro projects can make a big difference to communities in remote areas.
Tides, waves and currents can be used to generate electricity.
Although still in the research and development stage and not yet commercialized, promising ocean technologies include:
Wave energy, in which converters capture the energy contained in ocean waves and use it to generate electricity.
Converters include oscillating water columns that trap air pockets to drive a turbine; oscillating body converters that use wave motion; and overflow converters that use height differences.
Tidal power, produced either by tidal technologies using a dam (a weir or other barrier) to harvest energy between high and low tide, or by tidal stream or tidal flow technologies, or by hybrid applications.
Ocean thermal energy conversion, which produces energy from the temperature difference between warm surface seawater and cold seawater at a depth of 800-1,000 metres.
1 Enabling technologies: Technologies that play a key role in facilitating the integration of renewable energy e.g. batteries, EV charging, blockchain, Internet of Things and AI and big data.
2 Business models: Innovative models that create the business case for new services, improving system flexibility and encouraging greater integration of renewable energy technologies such as energy as a service, peer-to-peer trading and pay-as-you-go models.
3 Market design: New market structures and changes to the regulatory framework to encourage flexibility and value the services needed in a renewable energy system, stimulating new market opportunities, e.g. time-of-use tariffs and net metering.
4 System Operations: Innovative methods of operating the power system, allowing for the integration of larger shares of variable renewable energy generation, such as advanced weather forecasting, dynamic line pricing and virtual power lines.
Utility regulation can occur for several reasons:
desire to control market power,
promote investment or system expansion,
stabilize the markets.
Regulation occurs when the government believes that the operator, left to its own devices, would behave in a manner contrary to the government’s objectives.
National operators (controlled by the State) have been created.
But some governments have used public services provided by the state to pursue political objectives.
This often resulted in inefficiency and poor quality of service.
Governments have begun to look for alternatives, namely regulation and provision of services on a commercial basis, often through private participation.
Such regulation can include oversight of pricing, service quality and investment, as well as mechanisms to encourage investment by reducing political expediency, for example.
Possible areas of regulation :
Quality of service. Where customers are not able to observe quality and quality has significant value implications, professional regulation can establish quality standards, testing procedures and enforcement methods, as well as provide enforcement and inform customers.
Deployment of the infrastructure. Infrastructure deployment is often a priority. This deployment is strengthened and made more effective by improvements in stakeholder engagement and the financial sustainability of infrastructure services.
Universal access and service to the poor. Define specific access policies that meet the basic needs of the population.
Fighting market power. In some situations, operators may have market power because they are natural monopolies, which means that alternative service arrangements are much more expensive, or because barriers to entry prevent rivals. One approach to dealing with the market power of natural monopolies is to regulate prices and in cases where there are barriers to entry, regulation can deal with market power by removing or at least lowering the barriers.
Develop information systems. The availability and quality of data are generally significant barriers to effective management, planning and regulation. If decision-makers do not have good information, they usually treat the information or beliefs they have as fact and act accordingly.
Financial viability and capital attraction. Private investors are concerned about risk and are generally reluctant to provide capital in the absence of regulatory protection against political opportunism. Regulations can have a positive impact on financial sustainability and integrity by setting accounting standards, allowing commercially viable prices, setting standards that make services viable for the poor, assessing utility performance where data are available, reviewing utility operations, closing utility finances, and engaging with communities and other stakeholders.
In many contexts, infrastructure regulation is synonymous with the presence of an independent agency specifically charged with performing regulatory functions, such as monitoring prices, markets, investments, losses and quality of service.
Where state capacity is weak, simpler and less discretionary regulation is less likely to be undermined by corruption.
Instead, such a country may find it optimal to adopt regulatory instruments that address its most critical needs in a way that forms a pathway to the eventual development of an independent agency.
Another form of regulation rather than an independent agency:
Regulation by contract, which may also be called concession, can be effective when the service provided is well understood and unlikely to change, the contracted services are only part of the overall infrastructure service (such as the management of a water system), the institutions that could oversee a system with greater discretion are too weak, or a combination of all three. The contract should specify the allocation of risks, the obligations of the service provider, the means of financial compensation, the institutional arrangements for monitoring and enforcing the contract, and the dispute resolution mechanism. The government entity overseeing the contract should be as free of political interference as possible. The less independent the contract administrator, the greater the need for the dispute resolution process to be quick, efficient and free of political interference. The transitional consideration for regulation by contract should be that the staff responsible for enforcing the contract should be segregated as much as possible so that they can be part of the regulator at some point in the future.
Regulation by license. Regulation by license may be a hybrid of regulation by contract and regulation by statute. In this situation, the operator has a license that specifies its rights and obligations. A regulatory entity, such as a contract administrator, oversees the operator but cannot modify the license. As in the case of a contract, the licence must specify the rights and obligations of the licensee, the financial provisions, the means of monitoring and enforcing the licence, and the mechanisms for amending the licence and resolving disputes. As with contracts, the government entity overseeing the contract should be as free of political interference as possible. The less independent the license administrator, the greater the need for a dispute resolution process that is quick, efficient and free of political interference. The transitional consideration for regulation by licence should be that the staff responsible for its application should be isolated as much as possible so that they can be part of the regulatory agency at some point in the future.
Regulation by law. Regulation by law or statute is useful where there are sufficiently independent institutions to enforce the laws, and where the situations of service providers are sufficiently common that regulatory institutions can adopt rules that respond to individual circumstances.
In addition to the question of whether regulation should be by contract, licence, law or statute, it is necessary to specify the institutions that will perform the regulatory functions. These institutional arrangements for regulation, other than the existence of an independent agency, include self-regulation, local governments, national ministries, task forces and contracted regulators.
Self-regulation. Self-regulation occurs when service providers agree on standards and enforce them. The reasons for using self-regulation rather than government regulation are: (1) industry practitioners may have more technical expertise and knowledge than government officials; (2) in some situations, operators may have a strong incentive to develop practical rules and solve problems informally; (3) the costs of regulation may be internalized by operators; and (4) in some situations where regulation increases the value of the service, industry is motivated to adopt and enforce regulations even if there is an incentive to cheat because the benefits of regulatory compliance are a public good. Quality of service, safety, customer service and billing are examples of self-regulation. As long as self-regulation is effective, there is no need to migrate the system to an independent regulatory agency once it is developed, although sometimes regulatory staff become observers on the industry committee that administers self-regulation.
Sub-national governments. Local governments are effective transitional or even permanent regulatory institutions when they are institutionally stronger than other levels of government, when client engagement is a major feature of the regulatory system, and when service needs vary widely according to local conditions. Water utilities are the most commonly regulated service providers at the local level.
National ministries. National ministries sometimes perform regulatory functions. They have the advantage of being close to national policy makers, having a wider jurisdiction than local governments, and may have greater resources than local governments. In some situations they may be institutionally weak, but in all situations they are strongly influenced by national policy. National ministries can be effective in setting quality of service standards and national universal access/service policies, as well as in engaging with powerful stakeholders at the national level and developing national information systems. They are likely to fail to achieve financial sustainability because of their proximity to national politics. Similarly, they may be weak in removing barriers to competition, combating favouritism and managing funds for universal access/service.
Working groups. Intergovernmental working groups can be used to coordinate the regulatory functions provided by industry committees, local governments and federal departments. The mission of the working group depends on the situation and may change over time.