'Tech' Is Needed for Eco-Friendly Power Generation [Tech Talk]

Chronic Issue of Wind and Solar Power 'Variability'
VPP and ESS Needed for Eco-Friendly Tech
Market Still in Early Stage... Infrastructure Incomplete
Costs and Opportunities Both Hard to Overlook

The European continent, which had gone 'all in' on eco-friendly power, is now struggling due to the sharp rise in gas prices triggered by the Ukraine-Russia war. The stock price of Ørsted, the world's largest offshore wind turbine manufacturer, recently plummeted by 25%. There are even skeptical voices saying that the transition to renewable energy was premature.

Wind and solar power facilities, backed by government subsidies and tax benefits in various countries, have greatly advanced over the past decade. The actual cost of power generation has also significantly decreased. So why do concerns about the energy crisis persist?

Why Are Alternative Renewable Energies Expensive?

The world's largest offshore wind farm, Dogger Bank in the UK
[Image source: Equinor official website]

To understand the dilemma of renewable energy, we first need to know how renewable energy is generated. For example, imagine a country where wind power accounts for 50% of the total national power generation.

At first glance, it might seem that this country's wind turbines supply 50% of the power all year round. But in reality, that's not the case. The biggest problem with wind and solar energy is that the amount of power generated cannot be controlled by humans. The generation depends on annual changes in wind strength and sunlight.

In other words, the wind power in this country does not supply 50% of the power every day; on windy days, it generates 100%, and on windless days, 0%, averaging out to 50%.

If there is no wind at all, 50% of the national power generation disappears instantly. As a result, demand shifts to other power facilities, causing electricity prices to soar. On the other hand, problems also occur on windy days. When wind facilities suddenly supply too much power, the transmission network becomes overloaded.

Then, the transmission network operator must forcibly disconnect the wind facilities from the grid. Compensation must be paid to the owners of the disconnected wind facilities. This again causes electricity prices to surge.

Reduce 'Volatility'... The Rise of Eco-Friendly Tech

Tesla Powerwall, the leading representative of virtual power plants (VPP). It installs battery packs in homes to store surplus electricity and releases it back to the power grid when electricity is insufficient.
[Image source=Tesla]

As seen in the example above, volatility is the biggest reason why the actual cost of eco-friendly energy generation does not decrease. Even in Korea, where the share of eco-friendly energy is relatively low compared to advanced countries, news about 'excess eco-friendly power' is not uncommon. This shows how serious this problem will become as eco-friendly power takes a larger share of the energy mix.

Therefore, to use 100% eco-friendly power, flexible and resilient transmission network management technology and equipment capable of storing surplus power in the long term are needed. The representative examples of these two technologies are Virtual Power Plants (VPP) and Energy Storage Systems (ESS), respectively.

In the case of ESS, facilities capable of storing hundreds of megawatts (MW) of power at once by combining dozens of secondary battery packs are being built worldwide. However, ESS alone has clear limitations. No matter how high-performance the battery packs are, it is difficult to store power for long periods at this point. To compensate for this drawback, technology to produce hydrogen from surplus power is being developed, but mass production is still a long way off.

For this reason, VPP is more important now. VPP is a technology that manages multiple distributed power generation and storage facilities as if they were a single large power plant by linking them through cloud computing. It disperses surplus power to fill empty batteries or places energy production facility nodes in power-deficient areas facing blackout risks.

Example of Octopus Energy's power consumption pattern control technology. During the day, when solar panels produce excess power, prices are lowered in real time to encourage consumption, and at night, when generation is minimal, demand is reduced.
[Image source=Octopus Energy]

The countries leading in VPP technology are the United States and the United Kingdom, where the electricity retail market is privatized. In the U.S., the electric vehicle company Tesla is adopting VPP technology, and Octopus, the UK's second-largest energy retailer, already manages millions of customers with its own cloud-based intelligent power management system called Kraken.

As VPP technology deepens further, it will become possible to control human power consumption patterns as well. Octopus operates a system that reduces customers' electricity bills in real time when the operation rate of eco-friendly facilities exceeds a certain level. Through this, they use a 'nudge' strategy?an incentive that encourages specific choices?to increase demand when power is abundant and reduce demand when power decreases.

Moreover, VPP can extend beyond just power generation facilities and batteries to electric vehicles. This technology, called G2V/V2G (Grid-to-Vehicle / Vehicle-to-Grid), uses the entire battery capacity of electric vehicles plugged into charging stations nationwide as a VPP to control the supply and demand of eco-friendly power.

Neither Opportunities Nor Costs Can Be Deceived

Octopus's electric vehicle battery-to-power grid connection system, 'Powerloop'. Utilizing private electric vehicle batteries as a virtual power plant greatly helps solve future power overload issues.
[Image source=Octopus Energy]

Power generated by eco-friendly facilities requires technology to control volatility. However, both VPP and ESS are still in the early stages of market entry, and the biggest problem is that many renewable energy generation facilities have been built under these circumstances.

Renewable energy is undoubtedly the future. Carbon reduction is a global mission, and if the volatility problem explained above can be solved, we will be able to enjoy cheap electricity without being tied to certain resource-rich countries. However, it is important to remember that every 'transition' inevitably comes with corresponding costs and risks.

For example, to properly utilize VPP, the transmission network must be extensively upgraded. A so-called 'electric highway' made of high-voltage direct current (HVDC) lines must be built to deliver power to demand centers far from generation facilities or to ESS. Naturally, completing such public infrastructure will require enormous taxes.

High-voltage direct current (HVDC) cable from domestic cable company LS Cable. Eco-friendly energy with high power generation variability requires much more HVDC infrastructure than now.
[Image source=Yonhap News]

There are also considerations regarding VPP itself. Transferring power generation facility data, which has had little connection with digital technology until now, to the cloud requires massive capital and technical manpower. Whether borne by state-owned enterprises or attracting private capital, the transition to eco-friendly energy will require substantial fixed capital investment, at least in the initial phase.

Electricity is like the blood of modern civilization, and electricity rates are a sensitive issue in any country. Just as unconditional skepticism about renewable energy could block its potential, blindly optimistic views would also deceive us about the problems currently before us.

True eco-friendly energy transition can only begin after there is consensus on how much cost we can bear and what level of energy mix we aim to achieve.