Transformation under voltage – with the systemic consequences of the development of photovoltaics

The current model of integration of this technology leads to phenomena that significantly affect the total costs of functioning of the power system. This applies to both the need to expand the infrastructure and expenses for support mechanisms and the growing instability of the energy market. Below are the main challenges resulting from the dynamic increase in the power of solar installations in the system.

Dependence on conventional sources as a necessary supplementation of renewable energy

In Poland, over 22 GW of solar power and 11 GW from wind farms have already been installed, of which 13.8 GW solar installations and 3.1 wind GW were launched in 2021–2024. Despite this impressive scale, the withdrawal of coal power plants during this period was only symbolic. What’s more, some of the withdrawn units have been replaced with new gas sources (e.g. Dolna Odra). This is due to the characteristics of renewable energy sources, the production of which depends on the weather conditions and cannot be controlled in an elastic way, which forces the maintenance of conventional sources in readiness in the event of low generation periods.

Therefore, the security of the power system requires a parallel maintenance of available conventional powers – coal and gas – which take over the load at moments of limited production from renewable sources. As a result, the level of production capacity is maintained by exceeding real demand, even if photovoltaic installations periodically provide significant amounts of energy. This approach generates additional costs – the power market is financed from the power fee, which is a component of the energy bill, while the mechanisms of support for renewable sources – both green certificates and the auction system – are ultimately covered by end recipients. In the years 2016–2018, when the renewable energy fee was not yet charged or had a marginal nature, withdrawals were carried out from the own funds of the settlement manager or through loans, with the assumption of their later recovery by the tariff. Although the system does not formally use budget funds, it is a real burden on households and enterprises.

Network infrastructure in the face of the requirements of distributed energy sources

The development of photovoltaics may lead to the need to expand network infrastructure – both transmission and distribution – on a scale, which from an economic perspective may raise reasonable doubts. The assumption of decentralization of production was to reduce pressure on network development, but in the current model, with a strong emphasis on increasing connection power, the effect is opposite.

Networks and connections must be designed for maximum loads, even if they only occur for a small part of the year. This can be compared to the construction of the highway, which remains empty for most of the day to meet traffic for several hours a day. This type of oversizing may result in low economic efficiency of the investment, especially when it results from the need to connect sources with unstable production. In practice, the infrastructure remains underloaded for a significant part of time.

The costs of expanding the network are dispersed and hidden in distribution tariffs and final costs, which means that they are associated with the expansion of solar installations is not obvious to most recipients. Nevertheless, they constitute important, though often imperceptible, a burden for society.

Economic indicators and omitted system costs

In the public debate, the low LCOE (levelized cost of energy) indicator for photovoltaics is often cited, indicated as an argument in favor of its cost competitiveness. It is worth noting, however, that LCOE does not include a number of external costs generated by photovoltaic installations at the level of the entire power system. These costs include, among others, the maintenance of conventional production facilities, the purchase of more and more expensive system services, excess network expansion, investments in automation and digitization, as well as subsidizing renewable energy sources.

The LCOE indicator also does not include the installed power use coefficient (Load Factor), which remains relatively low for photovoltaic installations (about 10-12%), which means that they do not produce energy most of the time. This factor is further deteriorated as a result of the growing number of exclusions caused by negative energy prices or system restrictions. I skipping these factors means that LCOE can significantly underestimate the actual costs of this technology from the perspective of the entire system, which in turn can lead to the overestimation of its competitiveness.

The functioning of the energy market in conditions of increasing variability

The increase in the share of photovoltaics in the energy mix clearly affects the variability of prices on the spot market. Extreme fluctuations -from -500 PLN/MWh to +1200 PLN/MWh in two days -are becoming more frequent. On the one hand, this phenomenon may promote the development of flexible technology, such as energy magazines or DSR services. On the other – it causes an increase in price uncertainty, which must be taken into account by trading companies in tariffs, thus leading to higher costs for recipients.

Such high market instability can also discourage investors and financial institutions from supporting stable energy sources, necessary to ensure the balance of the system. Consequently, it becomes necessary to support these units with additional mechanisms such as the power market. It is worth noting that the current situation is largely the result of earlier regulatory interventions – enduring investment risk in renewable projects encouraged capital to place funds in public supported areas, often regardless of their economic efficiency.

Instruments such as the auction system, the “My electricity” program or tax breaks in practice have shifted the investment risk from the investor to the state – and then to the final recipient. Therefore, photovoltaics has become one of the main directions of investment in the energy sector, not always taking into account its real impact on the system as a whole. The market today makes investment decisions largely on the basis of available forms of support, which leads to a situation in which public funds are involved not only in the development of renewable sources, but also in maintaining conventional facilities and the expansion of network infrastructure.

A balanced approach to the role of photovoltaics is needed

The current model of photovoltaics, strongly based on public support and does not take into account the full image of system costs, requires a thoughtful revision. Photovoltaics can – and should – play its role in national energy transformation, but its scale must meet the possibilities of integration in a safe and economically justified manner. Today, the priority should be effective management of existing potential and minimizing the negative impact on the entire power system.

The events of recent months, including disturbances in the supply of energy that took place in Spain, confirm the importance of issues raised in this study. Experience is visible that even in countries with a high level of energy infrastructure development, sudden disorders in the system’s work may have extensive social and economic effects. The high share of renewable sources, including photovoltaics, requires precise adaptation of the system to the variability of production and adequate protection with power reserve and flexible infrastructure. The Spanish case is thus an example that is worth considering when further shaping the national energy policy. Rapid expansion of renewable technologies – without ensuring the stability and flexibility of the system – can lead to serious surgical disorders.

In order for the energy transformation to be sustained, it is worth baseing on three key rules.

1. Full inclusion of system costs – both in economic analyzes and in the design of public policy. This includes maintenance of conventional power, infrastructure investments and growing demand for system services.

2. Assessment of impact on market and system stability – including analysis of changes in the price structure, consumption profile and the needs in the field of reserves and flexibility.

3. Conscious design of support instruments – aimed at minimizing market disorders, supporting effective capital allocation and promoting solutions with a beneficial systemic impact.

Otherwise, there is a risk that photovoltaics – instead of supporting energy transformation – will become a source of costs and system challenges. To avoid this, it is necessary to make decisions based on a full picture – taking into account not only technology costs, but also their long -term impact on the structure, stability and costs of functioning of the entire power system.