Wärtsilä’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.
For the Philippines, which currently relies heavily on fossil fuels for its electricity generation, this transition represents a significant opportunity to enhance energy independence, stimulate economic growth through green job creation, and mitigate the impacts of climate change. The results from Wärtsilä’s global modelling report are in line with findings from the previous modelling for the Philippines in the Rethinking Energy in Southeast Asia report. Transitioning to a net zero system by 2050 could save approximately USD 9 billion annually, which is equal to 2% of the country’s GDP in 2023. With the right mix of renewable generation and balancing technology, Luzon can double its clean energy generation by 2040. For each gigawatt of renewable capacity, around 150 megawatts of flexible balancing power plants are necessary to ensure stability.
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
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
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- 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.”
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.
- 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.
- Redesign electricity markets to incentivize flexibility
- Reform electricity market structures to support greater integration of variable renewable energy. Balancing should be incentivized 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-optimized with energy and balancing requirements and provided by balancing technologies.
o Establish bankable revenue models for low-running-hour balancing power plants, including mechanisms like flexibility-linked capacity payments and scarcity pricing.
- 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.
“A holistic system-level approach is essential now more than ever to accelerate the Philippines’ energy transition and unlock the potential savings and emissions reductions,” said Frederic Carron, Vice President, Middle East and Asia, Wärtsilä Energy. “By deploying balancing power technologies alongside renewables and energy storage, we can ensure a stable, cost-effective power grid for the country as well as contribute to the global energy transition.”
