#LetsFlex: How will batteries and demand response drive the new EU energy system?

Over the past decade, solar PV has expanded more rapidly than any other energy technology in the EU, more than tripling its installed capacity from 82 GW in 2014 to more than 270 GW by the end of 2023. Notably, the bulk of this growth occurred over the past 5 years, with newly added PV capacity growing by +50% year-on-year. 

Interest in solar energy is primarily driven by its versatility and cost competitiveness, in a period where soaring energy prices driven by the Russian invasion of Ukraine took a big toll on EU businesses and households.

Looking forward, the current EU regulatory framework includes 2030 targets for renewables. Solar will be the backbone of this transformation, with a target of 750 GW by the end of the decade. Solar is set to provide a major contribution to attaining the EU 2030 target of 42.5% renewables.

Variable renewable energy (VRE) integration is key to ensuring that the tremendous benefits offered by new renewables are maximised. Integration is the process of incorporating solar and wind power into electricity systems securely and cost-effectively. 

Of course, the variability of solar and wind power outputs stems from changing weather and daylight conditions. To effectively balance supply and demand, increased power system flexibility is key in accommodating this variability. 

Flexibility can be defined as the ability of an energy system to adapt to changing conditions, such as variations in demand and supply, across relevant timescales. Hourly changes within a day, i.e. daily flexibility needs, are set to increase by up to six-fold by 2030, compared to 2021, and will represent 50% of the total flexibility requirements in 2030.

Solar PV, being the fastest-growing power source in the EU, is increasingly driving daily flexibility needs. However, most of the daily needs by 2030 can be effectively met with solutions that are already in use, like battery storage, demand response, pumped hydropower, bioenergy, and cross-border electricity imports. 

Our Solar-As-Usual (SAU) and Solar + Flexibility + Electrification (SF) scenarios illustrate the stark difference between business-as-usual practices and an inflexible system, versus a flexible and electrified system. In the former, high curtailment rates and cannibalisation effects can be expected, with much lower greenhouse gas (GHG) and cost savings. 

The graph above shows the contribution of different technologies to meet daily flexibility needs in the baseline inflexible vs flexible and electrified scenarios.

In an inflexible SAU scenario, batteries and demand response only meet 17% and 21% of daily flexibility needs respectively. In turn, traditional dispatch sources are utilised 21% of the time, with natural gas providing most of the generation. Demand response refers to the use of smart technologies, like heat pumps, electric vehicles, and electrolysers for renewable hydrogen, especially when energy is abundant and low cost.

In contrast, additional flexibility capacity and smart electrification in the SFE scenario lead to a much larger contribution from clean flexibility sources. Batteries would be utilised 27% of the time, while demand response supplies 39% of the daily flex needs. That is two-thirds of the total EU energy system flexibility needs! Conversely, and despite a much larger electrification of the energy system, fossils fuels and nuclear ramp ups are minimised to 7% and 3% respectively, which render additional economic and environmental benefits.

Importantly, achieving a flexible and electrified systems would deliver key benefits across a range of indicators by 2030:

• Solar curtailment, which is the waste of clean and cheaply produced electricity, is much reduced from 6.2% to 2.1% as flex solutions enable a better usage of increased solar electricity production.

• Price cannibalisation is directly addressed, as solar capture rates are 28% higher. Unlocking flexibility solutions has a positive effect on solar capture rates, since solar electricity supply can be shifted to times and places where it is needed, while demand-side flexibility gives better value to times of abundant production. This boosts the solar business case and supports investment in new solar projects.

• Annual GHG emission savings drastically improve as more than 150 million tonnes of CO2 eq. are reduced on a yearly basis by 2030. This volume corresponds to 25% of EU energy system emissions in 2023.

• Operational and annualised investment costs are greatly reduced compared to the baseline, thanks to the large cost savings from the electrification of heat, transport and hydrogen. Annual net system cost savings amount to €32 billion in 2030, relative to the inflexible SAU scenario.

The SFE scenario, underpinned by batteries and demand response, illustrates a configuration in which a high level of system flexibility and electrification optimises energy system performance and enhanced market opportunities for solar. Additionally, it highlights how unlocking electrification and flexibility solutions allows solar PV to surpass business-as-usual growth, and deliver more low-cost renewable energy to citizens and businesses.