J. Abrell, S. Rausch, and C. Streitberger (2019). Buffering Volatility: Storage Investments and Technology-Specific Renewable Energy Support. Energy Economics, forthcoming. Link to journal article: https://doi.org/10.1016/j.eneco.2019.07.023
J. Abrell, S. Rausch, and C. Streitberger (2019). Harnessing Wind and Solar Power in Europe: Optimal Storage, Cross-Border Transmission, and Tradable Green Quotas.
Mitigating climate change will require integrating large amounts of highly intermittent renewable energy 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. A recently published paper examines the suitability of regulatory mechanisms for coping with the volatility induced by intermittent renewables 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.
A follow-up project investigates the role of various flexibility mechanisms (energy storage, cross-border transmission capacity, and tradable renewable energy quotas) at the European level to achieve up to 70% of energy supply from wind and solar power in a future low-carbon energy-economy system.