Optimal Allocation of Variable Renewable Energy Considering Contributions to Security of Supply

Abstract

Electricity markets are increasingly influenced by variable renewable energy such as wind and solar power with a pronounced weather-induced variability and imperfect predictability. As a result, the evaluation of the capacity value of variable renewable energy, i.e. its contribution to security of supply, gains importance. This paper develops a new methodology to endogenously determine the capacity value in large-scale investment and dispatch models for electricity markets. The framework allows to account for balancing effects due to the spatial distribution of generation capacities and interconnectors. The practical applicability of the methodology is shown with an application for wind power in Europe. We find that wind power can substantially contribute to security of supply in a decarbonized European electricity system in 2050, with regional capacity values ranging from 1-40 %. Analyses, which do not account for the temporal and spatial heterogeneity of the contribution of wind power to security of supply therefore lead to inefficient levels of dispatchable backup capacity. Applying a fixed wind power capacity value of 5 % results in an overestimation of firm capacity requirements in Europe by 66 GW in 2050. This translates to additional firm capacity provision costs of 3.8 bn EUR per year in 2050, which represents an increase of 7 %.

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

“…Moreover, this unique pandemic has shown the importance of governmental interventions, regulations, and policies [58]. In the framework of the decarbonisation process meant to prevent climate change, renewable energy plays a strategic role, with an increasing importance of this type of energy on electricity markets [59]. In Europe, in the context of the Clean Energy Transition program, renewable energy has overtaken fossil-based electricity in 2020.…”

Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

“…The Paris Agreement established a global framework to prevent climate change. This new framework leads to the need for the decarbonization of the electricity sector, where renewable energy sources playing a critical role (Peter and Wagner, 2021). In Europe, renewables overtook fossil-fired electricity generation in 2020, which is an important achievement in Europe's Clean Energy Transition [1].…”

Renewable Energy Zones in Australia's National Electricity Market

“…(Schmidt et al, 2013;Alayo et al 2017;Pechan, 2017;Wagner, 2019). Pechan (2017) finds fixed price contracts drive VRE investment to the best resource sites whereas stronger locational signals and VRE plant exposed to spot markets produce spatial diversity because the 'earned price' of output (or 'capacity value' per Peter and Wagner, 2021) is just as important as output levels. 18 With government-initiated CfD and Feed-in Tariffs, maximising output is the only driver (Schmidt et al, 2013).…”