Relying almost entirely on energy from variable renewable resources such as wind and solar energy will require a transformation in the way power systems are planned and operated. This paper outlines the necessary steps in creating power systems with the flexibility needed to maintain stability and reliability while relying primarily on variable energy resources. These steps are provided in the form of a comprehensive overview of policies, technical changes, and institutional systems, organized in three development phases: an initial phase (penetration up to about 10%) characterized by relatively mild changes to conventional power system operations and structures; a dynamic middle phase (up to about 50% penetration) characterized by phasing out conventional generation and a concerted effort to wring flexibility from existing infrastructure; and the high penetration phase that inevitably addresses how power systems operate over longer periods of weeks or months when variable generation will be in either short supply, or in over-abundance. Although this transition is likely a decades-long and incremental process and depends on the specifics of each system, the needed policies, research, demonstration projects and institutional changes need to start now precisely because of the complexity of the transformation. The list of policy actions presented in this paper can serve as a guideline to policy makers on effectuating the transition and on tracking the preparedness of systems. (C) 2016 Elsevier Ltd. All rights reserved.