Deploying Balancing Power Could Accelerate India’s Energy Transition and Save €65 Trillion Globally by 2050: New Wärtsilä Report

Business Wire IndiaWärtsilä’s global power system modelling, published in the Crossroads to net zero report, compares two pathways from the year 2025 to 2050 with the aim to reduce greenhouse gas emissions and limit global warming, as per the Paris Agreement targets. In the first pathway, only renewables, such as wind and solar power, and energy storage are added to the power mix. In the second pathway, balancing power generation technologies, that can be ramped up quickly when needed to support intermittent renewables, are also added to the system.

India is on a transformative journey to integrate 500 GW of non-fossil fuel energy capacity by 2030. The Government of India has committed to inviting bids for 50 GW of renewable energy capacity annually from FY 2023-24 to 2027-28, a goal that requires meticulous planning, effective execution, and strong policy support. As India’s power system becomes more complex with an increasing share of weather-dependent renewable energy sources, enhancing system flexibility is crucial. A recent Wärtsilä-KPMG ancillary services market study underscores the need for greater operational flexibility, particularly in renewable-rich states like Gujarat, Tamil Nadu, and Rajasthan.

The modelling shows that a power system including balancing power has significant advantages when it comes to both cost and CO₂ reductions. The model reveals that this pathway would generate cumulative savings of EUR 65 trillion by 2050 compared to a renewables-only pathway, due to less renewable capacity needed. This would average EUR 2,5 trillion per year – an equivalent to over 2% of 2024’s global GDP.

The report outlines that the effectiveness of renewables can be maximised if supported by balancing power plants, which are key in scaling up renewable energy.

Key findings

1. Reduced costs: The study shows that compared to a renewables and energy storage-only pathway, the deployment of balancing power plants will reduce the cost of future power systems by as much as 42%, equalling EUR 65 trillion.
2. Reduced emissions: Adding balancing power can reduce the total cumulative power sector CO₂ emissions between now and 2050 by 21% (19 Gt), compared to the renewables and storage-only path.
3. Less wasted energy: The modelling shows that the use of balancing power allows for enhanced power system optimisation, resulting in 88% less wasted energy due to renewable curtailment by 2050, compared with a renewable and energy storage-only pathway. In total, 458 000 TWh of curtailments would be avoided, enough to power the whole world with the current electricity consumption for more than 15 years.
4. Less renewable capacity and land needed: By adding balancing power plants, we can halve renewable capacity and land needed to meet our decarbonisation targets.

Anders Lindberg, President Wärtsilä Energy & Executive Vice President, says:

“While we have more renewable energy on our grids than ever before, it is not enough on its own. To achieve a clean energy future, our modelling shows that flexibility is essential."

“We need to act now to integrate the right levels and types of balancing technologies into our power systems. This means rapidly phasing out inflexible assets and transitioning to sustainable fuels. Balancing power plants are not merely important; they are critical in supporting higher levels of renewable energy.”

Imagine a future where India’s power grid seamlessly integrates 500 GW of non-fossil fuel sources by 2030. To achieve this vision, it is vital to invest in resources like balancing power plants. The joint study between Wärtsilä and KPMG indicate that by 2030, India will need 9 GW of flexible balancing engines, utilising gas, to efficiently and reliably integrate renewable energy. To attract investments in flexible technologies and low-running-hour balancing power plants, it is crucial to implement a bankable revenue model. Options like flexibility-linked capacity payments or providing sufficient revenue incentives to these balancing power plants can drive this strategic shift. This strategic shift will ensure a stable and sustainable energy future for India.

Calls to action for the power sector

Decisive actions from the entire power sector are crucial to achieve a low-cost and low-emission energy transition in line with the 2050 Paris Agreement. Instead of only focusing on the acceleration of renewable build up, a holistic system level thinking must be in place when investing in and planning power systems.

1. Enable accelerated expansion of renewables and balancing technologies to ensure affordable electricity

• Enable fast expansion of renewables by upgrading transmission systems, streamlining permitting processes, and investments in regional interconnectors.
• Rapidly expand short and long duration balancing technologies to ensure grid reliability and resilience. Together, these technologies support the rapid growth of renewable energy, reduce reliance on inflexible assets, such as coal plants, and accelerate emission reductions.
• Mobilise financing to secure the development of renewable and balancing power projects at the necessary scale and speed.

2. Redesign electricity markets to incentivise flexibility

• Reform electricity market structures to support greater integration of variable renewable energy. Balancing should be incentivised to provide essential flexibility to optimise renewable energy systems.
  • Increase dispatch granularity to 5-minute resolution in energy wholesale markets. Shorter and more precise time frames for pricing and supply adjustments will support variable renewable energy integration and incentivise flexible balancing power plants that can respond quickly to changes in electricity demand.
  • Introduce new ancillary services to guarantee grid stability. The need for ancillary services increases with higher renewable penetration, and the supply can be co-optimised with energy and balancing requirements and provided by balancing technologies.
  • Establish bankable revenue models for low-running-hour balancing power plants, including mechanisms like flexibility-linked capacity payments and scarcity pricing.

3. Choose the right future proof technologies and prepare for sustainable fuels

• Select balancing technologies that are future proof and ready for the introduction of sustainable fuels to fully decarbonise the power sector from the mid-2030s onwards.
• Support rapid ramp up of renewables and enable the phase out of legacy technologies, by using natural gas as a transition fuel for flexible balancing power plants. Bridging the transition with gas balancing can cut more than 75% of annual power sector CO2 emissions by 2035 (in comparison to 2023 level).
• Prepare for the introduction of sustainable fuels by building the needed expertise and infrastructure to ensure a seamless transition to a fully decarbonised power sector in the future. Competitiveness or cost-parity of sustainable fuels will require policy action, which could be in the form of subsidies, regulation, carbon taxes or a mix of these.

Frederic Carron, Vice President, Middle East & Asia, Wärtsilä Energy, says: "India’s renewable energy growth is pivotal for meeting global climate targets. We must act now to integrate the right levels and types of balancing technologies into our power systems. To optimise this expansion, prioritizing flexibility through gas-based balancing power plants is essential. This will enhance efficiency, reduce curtailment, and unlock significant cost savings, ensuring a robust and sustainable power system for the future.”

Notes to editors:

Contrasting choice of net-zero pathways: In this study, we define two contrasting pathways between the period 2025-2050 to achieve net zero power systems, with an end goal to better understand the options and approaches for viable decarbonisation.

Pathway 1: Renewables and storage

In the Renewables and storage pathway, power sector expansion relies exclusively on variable renewable energy (VRE) and energy storage systems (ESS). Existing power plants are gradually decommissioned by 2040 but are allowed to operate within emission limits until retirement. No new power generation capacity except for renewables and energy storage systems is introduced during the modelling horizon.

Pathway 2: Balanced

In the Balanced pathway, expansion is also led by renewable energy and energy storage systems, but with the addition of balancing power plants that provide additional flexibility and enhance system performance. These are enabled for sustainable fuels that are expected to become more widely available in the 2030s. Existing inflexible power plants are gradually replaced with new capacity upon retirement. Capacity additions for nuclear, biofuels, and coal and gas plants with carbon capture and storage (CCS), follow conservative projections from publicly available sources, such as International Energy Agency (IEA) and International Atomic Energy Agency (IAEA).

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