Europe risks green goals without more flexible balancing capacity

Anja Frada, chief operating officer of Wärtsilä Energy, highlights the importance of energy market reform to boost flexible balancing capacity in an exclusive interview with Pamela Largue. Without this reform, argues Frada, Europe could miss out on achieving its ambitious renewable energy goals.

Frada's statement is based on Wärtsilä's recent report Energy Market Redesign - For a Decarbonised Europe which focuses on managing system imbalances of a renewable-based energy system.

In this context, Frada spoke about the large amounts of renewables that will be deployed in the future and the large amounts of flexibility needed to mitigate the accompanying intermittency.

Firm capacity will be needed for the electricity market, said Frada.

"After conducting the study, we see that...where we should really make some changes is with the capacity market.

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"Today the capacity market that we have in place doesn't really look at what the technology does, it just ensures that there is enough capacity.

"...We see that a lot of the capacity that has been increased is not flexible capacity which means it's not compatible to balance a renewables system."

Required reforms for the electricity market

Frada suggested specific reforms to the electricity market.

"We want to see a market that regards certain attributes of the technologies to ensure that we build a future system that will work in an optimal way and can maximise the benefit of renewables."

Frada also emphasised the need for sufficient market incentives to make a good business case for flexibility.

"We see that the energy-only market we have now is not enough. We need to ensure that the assets or investments have as many revenue streams as possible so they can participate in the energy-only market and also get some type of capacity fee so you have as many incentives as possible to invest in flexibility."

“We also need to ensure that we get more flexible technology investments by having more granular pricing signals and also being better at pricing certain services that the flexibility can offer the system,” said Frada.

Frada emphasised that only a technology-agnostic framework will be able to provide the fast ramp ups and ramp downs required. This means avoiding inflexible assets such as coal, nuclear or big gas turbines.

The role of gas as a transition fuel

Gas is a critical transition fuel for the future, said Frada.

"It doesn't sound logical but really gas will enable us to move to a much more renewable system because of the flexibility that it provides".

Frada explained that gas will be especially important in the next decade to ensure the firm, flexible capacity the system needs. Once that capacity is in place, then the sector should aim to build out and invest in renewable capacity. Eventually, fewer gas-based plants will run, giving way to more renewables, she explained.

"Then when we have the availability of sustainable fuels then we can also convert the existing plants to use sustainable fuels".

Frada concluded that despite the changes needed to our electricity market, the outlook is far from bleak.

"To make a giant leap in the transition we have all the technologies available today to go quite far. Based on the modelling we have done we can see that we can achieve an 80% renewable energy system just by deploying renewables and flexibility. I am really hopeful... but the biggest challenge is overcoming a slow permitting process for [these] renewables."

To unpack why and how Europe needs to add more flexibility to the current market design, listen to Enlit's Energy Transitions podcast with Anja Frada of Wärtsilä: