IEA (2023), Renewable Energy Market Update - June 2023, IEA, Paris https://www.iea.org/reports/renewable-energy-market-update-june-2023, License: CC BY 4.0
As the penetration of variable renewable energy (VRE) increases, the share of curtailed wind and solar PV generation is also on the rise in many markets. This trend is particularly evident in areas where major grid infrastructure investments and/or advanced market design and regulation are not keeping pace with VRE deployment.
Although VRE curtailment is increasing overall, the share of curtailed wind and solar PV generation remains relatively low, ranging from 1.5% to 4% in most large renewable energy markets. However, higher VRE shares do not necessarily result in rising curtailment rates, as countries can effectively manage renewable energy integration challenges with timely measures.
Inadequate investment in grid infrastructure remains a challenge worldwide not only for faster growth in new wind and solar PV capacity, but also for maximising generation potential from existing power plants. China's large-scale investment in grid infrastructure (USD 75 billion on average per year since 2010) has significantly reduced VRE curtailment, decreasing it from 16% in 2012 to less than 3% last year. During this period, China increased the interconnection capacity between wind and solar resource-rich northern and northwestern provinces to load centres in the southern and eastern regions.
Germany has experienced increasing VRE curtailment over the past decade, but this trend has stabilised since 2015. While most of the country’s wind capacity is situated in the north, major industries and load centres are in the south, leading to a geographical mismatch between renewable generation and consumption. This mismatch results in curtailment, particularly when the country cannot export its renewable electricity due to limited interconnection capacity.
While major grid investment decisions to strengthen the north-south corridor are still pending, Germany has implemented smaller-scale grid expansions. These have helped the country reduce onshore wind curtailment by 2 percentage points since 2015, but offshore wind curtailment increased from less than 1% to around 8% over the same period.
In Chile, the geographical mismatch between VRE deployment and demand has resulted in high curtailment rates. The country's strong solar and wind potential is located primarily in the north, whereas most demand is concentrated in the centre. To address this mismatch, Chile merged its central and northern electricity systems in 2017, resulting in an initial reduction from 14% curtailment that year to 2% a few later. However, this trend was not sustained, with VRE curtailment reaching almost 6% in 2022, as wind and solar PV capacity more than tripled since 2017, while the commissioning of additional grid capacity faced delays.
In 2022, the United Kingdom generated one-fourth of its electricity from wind power, mainly from onshore wind farms in Scotland and offshore installations. However, most electricity demand is in the country’s southeast. This has led to increased curtailment, with the amount reaching almost 4 TWh in 2022. Curtailment rates remained stable at around 3% in the second half of the 2010s but have since increased due to limited transmission capacity at the Scottish-English interface. To address this challenge, the national energy regulator plans to build an high-voltage direct current (HVDC) link on the east coast to increase interconnections.
To successfully manage rising VRE integration, it is crucial to not only make physical changes to the power system, but to adjust system planning. China’s success in reducing curtailment stems not only from grid capacity expansion but from the government changing FIT remuneration rates to provide higher incentives in provinces with limited system integration challenges, among other measures.
As lead times for grid investment can be long, policies promoting electricity storage systems can also be useful to relieve high curtailment rates. Chile's 2022 law on electricity storage and electromobility aims to tackle renewable energy curtailment by incentivising installation of batteries and enabling electric vehicles to inject energy into the distribution grid. Meanwhile, Ireland has allocated budgetary funds for storage infrastructure in its Renewable Electricity Support Scheme (RESS) and has begun to award projects through auctions by providing them long-term revenue certainty and reduced financing costs.
Integrating VRE sources such as wind and solar PV has necessitated changes to traditional power markets, both in their design and technical regulation.
Some countries are updating their market design to facilitate the VRE participation in their power markets, for instance by shortening the imbalance settlement period, reducing the gate closure time, and increasing the geographical granularity of the market. Furthermore, renewable energy generators could also be included in intraday markets (or balancing markets). Operational measures to increase system flexibility involve lowering the thermal fleet’s minimum operational requirements and enhancing forecasting methods.
Ireland has increased its System Non-Synchronous Penetration limit and reduced minimum negative ramping reserve requirements while offering wind farms financial incentives to voluntarily reduce their output during high-generation periods. Chile is also considering options to further reduce thermal plants’ minimum operation requirements to increase system flexibility.
Enabling VRE to compete in balancing markets would provide additional income for renewable generation, while exposure to imbalance penalties would incentivise producers to smooth their output and improve forecasting. California has introduced an Energy Imbalance Market (EIM) to balance supply and demand to curb rapidly increasing curtailment rates. This approach relates to the concept of economic dispatch-down, wherein generators may bid out of dispatch during times when high levels of renewable energy are available and demand is low, which could result in zero or negative prices. For instance, economic curtailment in Australia has increased since 2017 and was responsible for the majority of curtailment in 2021.