Buffering volatility: Storage investments and technology-specific renewable energy support

Open access
Date
2019-01Type
- Working Paper
ETH Bibliography
yes
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Abstract
Mitigating climate change will require integrating large amounts of highly intermittent renewable energy (RE) sources in future electricity markets. Considerable uncertainties exist about the cost and availability of future large-scale storage to alleviate the potential mismatch between demand and supply. This paper examines the suitability of regulatory (public policy) mechanisms for coping with the volatility induced by intermittent RE sources, using a numerical equilibrium model of a future wholesale electricity market. We find that the optimal RE subsidies are technology-specific reflecting the heterogeneous value for system integration. Differentiated RE subsidies reduce the curtailment of excess production, thereby preventing costly investments in energy storage. Using a simple cost-benefit framework, we show that a “smart” design of RE support policies significantly reduces the level of optimal storage. We further find that the marginal benefits of storage rapidly decrease for short-term (intra-day) storage and are small for long-term (seasonal) storage independent of the storage level. This suggests that storage is not likely to be the limiting factor for decarbonizing the electricity sector. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000319612Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Renewable Energy; Electricity; Volatility; Intermittency; Storage; Technology-specific Regulation; Subsidies; Energy Policy; Climate PolicyOrganisational unit
02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.03981 - Rausch, Sebastian (ehemalig) / Rausch, Sebastian (former)
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ETH Bibliography
yes
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