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Abstract:We examine the effects of increasing amounts of fluctuating renewable energy on residual load. We draw on policy-relevant scenarios for Germany and make use of extensive sensitivity analyses. Our simulations show that the expansion of fluctuating renewables shifts the right-hand side of the residual load curve downwards. Whereas yearly renewable surplus energy is low in most scenarios analyzed, peak surplus power can become very high. Decreasing thermal must-run requirements and increasing biomass flexibility substantially reduce surpluses. Using an optimization model, we determine the storage capacities required for taking up renewable surpluses, allowing for varying levels of curtailment. Allowing curtailment of 1% of the yearly feed-in of non-dispatchable renewables would render storage investments largely obsolete until 2032 under the assumption of a flexible power system. Further restrictions of curtailment and lower system flexibility strongly increase storage requirements. Our results suggest that policy makers should not be too concerned about additional storage for taking up renewable surpluses, but should rather focus on measures to avoid surplus generation in the first place, in particular by decreasing the must-run of thermal generators. In a sufficiently flexible power system, minor renewable curtailment does not impede achieving the German government's renewable energy targets.JEL codes: Q42; Q47; Q48