Locational Marginal Network Tariffs for Intermittent Renewable Generation

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstractThe variability of solar and wind generation increases transmission network operating costs associated with maintaining system stability. These ancillary services costs are likely to increase as a share of total energy costs in regions with ambitious renewable energy targets. We examine how efficient deployment of intermittent renewable generation capacity across locations depends on the costs of balancing real-time system demand and supply. We then show how locational marginal network tariffs can be designed to implement the efficient outcome for intermittent renewable generation unit location decisions. We demonstrate the practical applicability of this approach by applying our theory to obtain quantitative results for the California electricity market.

(Mis)allocation of Renewable Energy Sources

“…While there are usually benefits related to some solar production in the electricity system, ancillary service costs increase as more solar needs to be connected to the grid; yet the exact response depends on an interplay of load and solar output. This finding is in line with Tangeras and Wolak [2019].…”

“…More specifically, our paper shows that in the presence of a flat incentive for RES adoption, the addition of a quota-type policy could have increased the gains from the costs savings of displacing conventional sources of electricity and the value of the associated emissions avoided. 10 7 One exception is Tangeras and Wolak [2019]. 8 This paper is also related to the challenging task of evaluating different stringency levels of policies that incentivize the adoption of RES.…”

“…The third component in our marginal benefits calculation has received little attention in the literature. One exception is Tangeras and Wolak [2019] who use a kernel regression to find the effect of renewables output on ancillary costs in California. Their results show that the effect can change signs depending on the amount of load and renewables.…”

“…Our work is related to the literature that quantifies the value of the marginal output from RES (Callaway et al [2018]), the value of displaced emissions in electricity markets using the exogeneity of wind and solar output (Abrell et al [2019a], Cullen [2013], Novan [2015]), and the costs from the fluctuations in ancillary services due to RES expansions (Tangeras and Wolak [2019]). Our reallocation counterfactuals have similarities to those in Asker et al…”

(Mis)allocation of Renewable Energy Sources

“…the exogeneity of wind and solar output (Abrell et al [2019a], Cullen [2013], Novan [2015]), and the costs from the fluctuations in ancillary services due to RES expansions (Tangeras and Wolak [2019]). Our reallocation counterfactuals have similarities to those in Asker et al [2019] for oil extraction and in Sexton et al [2018] for solar panels.…”