1. Wissenschaftliche Aussprache zur Dissertation
Integrating variable electricity supply from wind and solar PV into power systems   
vorgelegt von
Diplom-Physiker
Falko Ueckerdt
Fakultät VI – Planen Bauen Umwelt
der Technischen Universität Berlin
zur Erlangung des akademischen Grades
Doktor der Naturwissenschaften
Dr. rer. nat.
Berlin, den 15. Juli 2014

2. Global electricity generation 2013
<4 %
wind & solar
My thesis aims at understanding variability to improve the economic evaluation of wind and solar PV ?
~70 %
Fossil fuels
Data from REN21 (2014) 2

3. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1)

4. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
Hirth & Ueckerdt
Energy Policy 2013
Hirth, Ueckerdt, Edenhofer
submitted to
Renewable Energy
How do integration costs affect the optimal share of variable renewables?
(paper 3)
Ueckerdt, Müller,
Hirth, Nicolosi
submitted to
Renewable Energy
Ueckerdt, Brecha, Luderer, Sullivan, Schmid, Bauer, Böttger
submitted to Energy
What are the full costs of variable renewables?
(paper 2)
Ueckerdt, Hirth,
Luderer, Edenhofer
Energy 2013
Ueckerdt, Brecha, Luderer
submitted to
Renewable Energy
What are major integration challenges of variable renewables?
(paper 1)

5. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 5

6. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 6

7. Variable renewables (VRE) have three characteristic properties
Output is variable in time
 matching of demand supply with wind is costly
Output is uncertain
 short-term balancing of supply and demand is costly
Output is variable in space
 transmission is costly
Forecast MW MW
Load
Wind power
Wind power
1 year
1 day
Wind and solar are variable. In contrast to fossil and nuclear variable renewables have three characteristic properties that makes it difficult to integrate them into an electricity system.
1st: Wind speeds and solar radiation vary over time and can hardly be controlled. See here the spiky pattern of wind over one year. Sometimes wind exceeds demand, sometimes it is far below. Matching the red demand is costly.
2nd: VRE output is uncertain before delivery (day-ahead). See here the forecast and real production for Germany last Sunday. The other power plants have to adjust their output in response to wind generation which is costly.
3rd: Resource quality varies geographically. Primary energy carrier cannot be transported. Electricity transmission to demand centers is needed.
All three properties cause integration costs. These costs need to be payed in addition to the costs for a wind turbine or a solar panel. Of course, high integration costs reduce the optimal amount of wind and solar and their role in climate mitigation.
Any economic analysis of VRE should consider variability and integration costs
Bild 1, 2 neu machen
Shrink and move
Gut 2min
„Profile costs“
„Balancing costs“
„Grid costs“
Integration costs

8. The Residual Load Duration Curve (RLDC)
Load curve (demand)
German data MW t
1 year 8
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

9. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Load Duration Curve
German data MW MW
Sorting t
1 year
1 year (sorted) 9
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

10. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Load Duration Curve
German data MW MW t
1 year
1 year (sorted)
Load and renewable supply MW t
1 year
Wind 10
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

11. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Load Duration Curve
German data MW MW t
1 year
1 year (sorted)
Load and renewable supply
Residual load curve MW MW
Load – renewables t t
1 year
Wind
1 year 11
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

12. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Load Duration Curve
German data MW MW t
1 year
1 year (sorted)
Sorting
Load and renewable supply
Residual load curve MW MW t t
1 year
Wind
1 year 12
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

13. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Residual Load Duration Curve
German data MW MW t
1 year
1 year (sorted)
Sorting
Load and renewable supply
Residual load curve MW MW t t
1 year
1 year 13
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

14. The Residual Load Duration Curve (RLDC)
Load curve (demand)
Residual Load Duration Curve
German data MW MW
Wind t
1 year
1 year (sorted)
Load and renewable supply
Residual load curve MW MW t t
1 year
Wind
1 year 14
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

15. With higher penetrations the challenges increase
RLDC capture the major impacts of temporal variability
65% share
65% share
50% share
35% share
12% share
Load (normalized to peak load)
Load (normalized to peak load) 1 1
Reduced full-load hours
Overproduction
(1%)
Low capacity credit
Reduced full-load hours
Overproduction
(5%)
Low capacity credit
Reduced full-load hours
Overproduction
(17%)
Low capacity credit
German data
(2011)
1 year (sorted)
1 year (sorted)
1 year (sorted)
Overproduction
(56%)
Overproduction
(17%)
Wind : Solar
1 : 3
Wind : Solar
3 : 1
These three challenges induce profile costs
We measure those challenges in an extensive data analysis 15
Ueckerdt, Brecha, Luderer. „What are major integration challenges?“

16. paper 1: Ueckerdt, Brecha, Luderer. „Major integration challenges?“
Integration challenges depend on penetration, VRE mix and regional patterns of VRE and load
Challenge parameter 1: capacity credit
US Midwest
Germany
Wind penetration
Solar penetration 16
paper 1: Ueckerdt, Brecha, Luderer. „Major integration challenges?“

17. paper 1: Ueckerdt, Brecha, Luderer. „Major integration challenges?“
Integration challenges depend on penetration, VRE mix and regional patterns of VRE and load
Challenge parameter 1: capacity credit
US Midwest
Germany 17
paper 1: Ueckerdt, Brecha, Luderer. „Major integration challenges?“

18. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 18

19. What are the full costs of variable renewables?
𝐿𝐶𝑂𝐸≔ 𝑦=1 𝑙𝑖𝑓𝑒𝑡𝑖𝑚𝑒 𝑐 𝑦 1+𝑟 𝑦 𝑦=1 𝑙𝑖𝑓𝑒𝑡𝑖𝑚𝑒 𝑔 𝑦 1+𝑟 𝑦
€/MWh
𝑔 𝑦 : generation in year 𝑦
𝑐 𝑦 : costs in year 𝑦
𝑟: discount rate
Wind LCOE
Coal
LCOE
IEA & NEA 2011, EIA 2013, IRENA 2012, IPCC 2011, Nitsch et al. 2011, Kost et al. 2012, Karlynn & Schwabe 2009, …

20. What are the full costs of variable renewables?
The new metric allows comparing technologies and should replace LCOE
integration costs are derived from a qualitative definition: “all additional costs in the non-VRE part of the power system when adding VRE”
A quantification of System LCOE requires the decomposition
€/MWh
Wind LCOE
Integration Costs
Wind System LCOE 20
Ueckerdt, Hirth, Luderer, Edenhofer. „Full costs of variable renewables?“

21. What are the full costs of variable renewables?
Profile costs were estimated from an own model for Germany
Grid and balancing costs from a literature review
Limitations: only power sector considered, no import/export, no demand response, no storage
€/MWh
profile costs
balancing costs
grid costs
Integration costs
Wind LCOE
Integration Costs
Wind System LCOE 21
Ueckerdt, Hirth, Luderer, Edenhofer. „Full costs of variable renewables?“

22. Variability matters: high integration costs at high VRE shares
Changing residual capacity
System LCOE of wind
Grid costs
Balancing costs
Integration costs
Profile costs
djustments 22
Ueckerdt, Hirth, Luderer, Edenhofer. „Full costs of variable renewables?“

23. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 23

24. How do integration costs affect the optimal share of VRE?
Cost perspective
Wind System LCOE
Integration costs
Wind LCOE
Average electricity price
Grid parity
€/MWh
€/MWh
𝑞 ∗
𝑞 0
q wind share
Wind LCOE
Integration Costs
Wind System LCOE
optimal share 24
Hirth, Ueckerdt, Edenhofer. „Economic framework: optimal share?“

25. Two perspectives on integration costs
Cost perspective
Value perspective
€/MWh
€/MWh
Both perspectives have their fans. Some like marginal value perspective and ask: why costs? Others (engineers) like costs and do not know what is meant by marginal value. Advantages of cost perspective:
i. Intuitive format of LCOE
ii. IAM
Integration costs
Wind LCOE
Integration Costs
Wind System LCOE
Average electricity price
Integration Costs
Wind
marginal value 25
Hirth, Ueckerdt, Edenhofer. „Economic framework: optimal share?“

26. Two perspectives on integration costs
Value perspective
Wind LCOE
Average electricity price
Integration costs
€/MWh
Wind marginal value
𝑞 ∗
q wind share
optimal share 26
Hirth, Ueckerdt, Edenhofer. „Economic framework: optimal share?“

27. Two perspectives on integration costs
Cost perspective
Value perspective
q wind share
Wind System LCOE
Wind LCOE
𝑞 ∗
optimal share
€/MWh
Average electricity price
q wind share
Wind LCOE
𝑞 ∗
optimal share
€/MWh
Wind marginal value
Average electricity price 27
Hirth, Ueckerdt, Edenhofer. „Economic framework: optimal share?“

28. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 28

29. What are redistribution effects due to VRE support policies?
How to improve the representation of variability in integrated assessment models?
(paper 5)
What is the link between the marginal value and integration costs literature?
(paper 4)
What are redistribution effects due to VRE support policies?
(paper 6)
How do integration costs affect the optimal share of variable renewables?
(paper 3)
What are the full costs of variable renewables?
(paper 2)
What are major integration challenges of variable renewables?
(paper 1) 29

30. Representing residual load duration curves in IAMs
Time (sorted)
1 year
Load
(GW)
Base load box
Intermediate
load triangle
𝑪 𝒃𝒐𝒙
𝑪 ∆
𝑪 𝒑𝒆𝒂𝒌
𝜸: curtailment rate
The RLDC endogenously changes controlled by 4 parameters
Changes depend on penetration and mix of VRE
2-dimensional functions are derived from data
Power-to-gas storage
Curtailment rate
Wind penetration
Solar penetration 30
Ueckerdt, Brecha, Luderer, Sullivan, Schmid, Bauer, Böttger. “Representing variability in IAMs?”

31. RLDC approach: variability reduces the power generation from VRE
REMIND-D model
GHG mitigation scenario for Germany (-80% GHG emissions in 2050 rel. to 1990) 31
Ueckerdt, Brecha, Luderer, Sullivan, Schmid, Bauer, Böttger. “Representing variability in IAMs?”

32. RLDC approach: Variability increases mitigation costs
Costs of variability
Savings due to Power-to-gas
Additional costs due to RLDC approach
-6%
+18%
+12%
REMIND-D model
GHG mitigation scenario for Germany (-80% GHG emissions in 2050 rel. to 1990)
Ueckerdt, Brecha, Luderer, Sullivan, Schmid, Bauer, Böttger. “Representing variability in IAMs?”

33. Integrated assessment models
The scientific literature was inconclusive about the economic impact of variability
Integration costs literature
“Estimates of integration costs are low”
No rigorous and complete definition of integration costs
Marginal economic
value literature.
„High impact of variability on marginal values“
Neglects general equilibrium effects & energy sector links
Integrated assessment models
„Variable renewables are a prominent mitigation option“
Representation of variability needs to be improved ? ?
“The scientific literature is inconclusive about the economic impact of variability”
I distinguish three research branches that to some extent have the same research objective: evaluating variable renewables
They differ in scope and detail. Actually there is a trade-off between scope and detail.
The highest scope have studies of Integrated Assessment Models. These are global models with a long-time horizon. They try to combine all drivers of climate change and mitigation options into a single modelling framework to derive mitigation scenarios. Many of these models show: „variable renewables are a prominent mitigation option“
However, their high scope does not allow much detail. They can not use the resolution that is needed to explicitly incorporate variability of wind and solar. Instead they use stylized approaches of representing VRE. However, those approaches have strong limitations. So, the representation of variability needs to be improved. Of course, this withdraws credibility from their results.
Fortunately, there are also studies with very high detail. Integration cost studies take an existing power system and add wind or solar and try to measure the imposed integration costs. They show that higher shares of wind and solar are technically feasible. And they claim that integration costs are low.
it indicates that integrated assessment models do not make such a huge mistake.
However, there is no rigorous definition of integration costs and it is not sure if their estimates account for all impacts of variability.
There is a third research branch with intermediate scope and detail. These studies estimate the marginal value of wind and solar.
They find that variability has a high impact on the economics of wind and solar. The marginal value reduces significantly due to variability at higher shares of wind and solar. This is an apparent contradiction to the integration cost literature.
Because the three branches use different scope and detail they could ideally complement and inform each other.
But the branches are hardly connected. The authors tend to come from different backgrounds. They use different concepts and terminology and hardly cite each other. Thats why it is unclear how to relate their concepts and results. So, the future role of wind and solar under consideration of their variability is unclear.
High detail
Wide scope 33

34. This thesis bridges the three literature branches
Integrated
assessment
models
„Variable renewables are a prominent mitigation option“
Representation of variability needs to be improved
Marginal
value literature.
„High impact of variability on marginal values“
Neglects general equilibrium effects & energy sector links
Integration
costs literature
“Estimates of integration costs are low”
No rigorous and complete definition of integration costs
This thesis
Definition of integration costs
Quantification of integration costs
Profile costs
Two equivalent perspectives
Two methods to represent variability
RLDC approach
System LCOE
My thesis presents a new economic framework of variability with 4 elements
The first rigorous and comprehensive definition of integration costs  that now has an economic interpretation because it equals the economic costs of all aspects of variability
There are two perspectives on integration costs: A cost perspective corresponds to the int cost view and a value perspective corresponds to the marginal value literature. If integration costs are defined the right way, those perspectives are equivalent. The reason why int cost estimates were to low compared to mv literature is that they neglected the most important cost component of integration costs: I call it ‚profile costs‘. Me and my co-authors could hereby relate the concepts of both research strands and resolve the contradiction.
From both perpectives VRE can be evaluated and each can show that variability increases the optimal share of VRE.
Moreover, from the cost perspective I developed a new metric System LCOE that allows comparing VRE with other technologies and correcting the misleading indicators that were used before.
Finally, me and my co-authors quantify integration costs and show that they can indeed become very large at high shares.
Based on the framework of variability I suggest two methods of how to represent variability in IAMs
The first method is the RLDC approach which uses residual load duration curves to represent variability. I show later what this is.
The second method uses the new metric System LCOE as a simple parameterization of the full costs of VRE including integration costs. 34

35. Top 4 policy implications
A system perspective is required for evaluating VRE.
Variability should be considered in market design and policy instruments.
System adjustments and integration options can reduce integration costs.
High integration costs do not imply that optimal VRE shares are low. Externalities of all technologies need to be internalized.
4 implications only. It is quite simple!
A system perspective is required for evaluating VRE.
Otherwise you miss the important aspect of variability. Do not use simple indicators like LCOE or grid parity.
2) Variability should be considered in market design and policy instruments.
In principle, there is no indication in my thesis that integration costs are an externality. Market prices could reflect them. If that is the case a market equilibrium would realize optimal shares of VRE.
3) System adjustments and integration options can reduce integration costs
Allow for them, but do not push them. Integration options are not an end in itself. Perfect markets would create a businuess case for integration options if the are socially optimal. Many no regret-options: DSM
4) High integration costs do not imply that optimal shares are low. Externalities of all technologies need to be internalized.
Umformulieren, sodass echte recommendations draus werden?
A system perspective is required for evaluating VRE
Dont use LCOE or grid parity
Integration costs can become an economic barrier to high deployment levels of wind and solar power
To the extent that markets are perfect, integration costs will be reflected in prices: decreasing market value. Without subsidies, investors would not invest in VRE. If a country wants higher VRE shares it needs to be honest, that VRE need continous support. However, externalities of all technologies need to be included. That increases the optimal share.
System adjustments including integration options reduce integration costs
Open the market for Demand response. Create incentives to foster those options. However, be careful: the role of some options is unclear. There are not an end in itself. Brings me to the next point. Ideally, markets should reflect variability.
Variability should be considered in market design and policy instruments
This creates incentivices for adjustment of the system. For instance: only if market prices reflect profile costs this can incentivice integration options like storage.
In the short term, VRE deployment can induce high costs and redistribution flows.
Be aware. Mix of policies. Keep the long term perspective even if there is some friction in the short term. 35

36. Thank you for your attention!