THE VALUE OF ELECTRIC ENERGY STORAGE IN ELECTRICITY SYSTEMS WITH HIGH SHARES OF WIND AND SOLAR PV

25-08-2017 -  Manuel VILLAVICENCIO

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Keywords: Electricity storage, demand-side management, renewable integration, system value, welfare effects.


ABSTRACT
The adoption of ambitious targets for variable renewable energies (VRE) such as wind and solar has important effects on the technical and economic operation of power systems. Increasing shares of VRE will, in particular, require the deployment of more flexible and responsive technologies. Key flexibility providers in the scope are demand side management (DSM) and different forms of electric energy storage (EES) such as pumped hydroelectric (PHS), li-ion batteries (Li-ion), and compressed air (CAES), among others. It has been previously shown how the value and the deployment of such new flexibility providers depended on the shares of VRE shares introduced into the system as developed in (Brijs et al., 2016; Van Stiphout et al., 2015; Villavicencio, 2017). Building on these works, this paper explores the value of storage in the context of a realistic brownfield model calibrated on the existing French electricity system. In particular, this paper compares the value of storage (a) in a system corresponding to the 2015's Energy Transition Act for 2020 and 2030. In 2020, 4.7 GW of DSM are sufficient to provide the required flexibility and no EES investments will be needed. By 2030, however, in addition to a comparable level of DSM, 3.2 GW of additional EES investments are required. These storage solutions would generate an economic value of € 350 million per year and would increases overall welfare by € 670 million per year by 2030. The study yields a number of additional policy relevant results. First, limiting nuclear production will open opportunities for alternative base and mid-load providers, mainly gas, implying a threefold increase of CO2 emissions compared to 2020 levels. Second, wind and PV increase their surplus at the expense of profit reductions of baseload conventional technologies. Third, peak-load capacity is reduced but the capacity remuneration mechanism (CRM) allows covering up fixed costs to attain the zero profit condition. Fourth, EES lowers the cost of VRE integration which under the assumption of a complete cost retrofitting to consumers, made them significantly better-off, benefiting from a less constrained system. Fifth, an important dynamic inconsistency exists concerning the investment path to optimally attain both 2020 and 2030 targets, which urgently requires a decision at the policy level for prioritizing or target harmonization.

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