Steering Renewable Energy Investments in Favor of Energy System Reliability: A Call for a Hybrid Model

Abstract

The global increase in electricity supply volatility due to the growing share of intermittent renewable energy sources together with recent extreme weather events draws attention to energy system reliability issues and the role of renewable energy sources within these systems. Renewable energy deployment strategies have already become a key element in debates on future global energy systems. At the same time, more extensive use of renewable energy sources implies a higher dependence on intermittent power, which puts the reliability of the electricity system at risk. Policymakers are introducing measures to increase the reliability of energy systems. Paradoxically, support for renewable energy and analyses of energy system reliability have been dealt with by two different and rarely overlapping research approaches. As a result, renewable energy promotion has often been designed without accounting for system reliability. To our knowledge, a model that captures those investment incentives and allows for tuning such financial support does not exist. This paper introduces a hybrid model that can potentially steer renewable energy investments in favor of energy system reliability. We demonstrate the idea of reliability-based support for renewable energy sources in action using a stylized case. Depending on the complementarity of different renewable energy power outputs available in the system, such reliability-based support can substantially reduce the necessity for greater backup capacity, can cut the overall costs of the energy system, and can reduce its environmental footprint.

Ex-Ante Study of Biofuel Policies–Analyzing Policy-Induced Flexibility

“…Green investments are still generally characterized by high costs relative to older technologies and high uncertainty is involved [3,4] (in the power sector many types of renewables are already cheaper than conventional generation [5], but extra costs arise due to their intermittency when the system reliability issues are taken into account [6][7][8]). For these reasons support mechanisms that are meant to incentivize green investments have been put in place.…”