Strategic Use of Storage: The Impact of Carbon Policy, Resource Availability, and Technology Efficiency on a Renewable-Thermal Power System

Abstract

Concerns about climate change have spurred governments to reduce carbon emissions by supporting adoption of renewable energy (RE) technologies. Due to the intermittent and location-specific nature of RE technologies, energy storage has become important because it could be used to smooth out temporal disparities in residual demand. Thus, carbon policy has made storage-enabled RE generation more critical to the power sector, and this enhanced position could be exploited by firms to exert market power. Using an equilibrium model, we examine the implications of policy interventions and technological change on the marginal value of energy storage in a power market with RE and thermal generation. In particular, we specify the market conditions under which RE producers with storage strategically shift deployment of their resource to the off-peak period and outline its implications for the marginal value of RE storage. Moreover, we find that even pricetaking RE producers may actually increase off-peak RE production as storage efficiency increases. Consequently, the RE producer's profit decreases with storage efficiency, which conflicts with the social objective of improving storage efficiency. These private and social incentives can be better aligned via a carbon tax, however. Hence, our results may inform the regulatory process governing market design of a power sector with increasing capacities of RE generation and storage.

Green energy platform economics – understanding platformization and sustainabilization in the energy sector

“…New technology for balancing grid services is thus essential when replacing conventional energy production and transforming the energy system toward renewable sources (Motalleb et al , 2016). Among these new load-management technologies, energy storage assets such as batteries will be critical to the integration of renewable resources (Debia et al , 2019). Ilieva and Rajasekharan (2018) describe how multi-sided platforms can pool, coordinate and monetize an array of storage assets at the consumer level.…”

The competition and equilibrium in power markets under decarbonization and decentralization

“…Additionally, to incentivize the development of green energy, several green financial products are launched to reward their environmental friendliness. Helgesen and Tomasgard study the green license and analyze its impact on the operation of the electricity market by calculating the joint equilibrium [35] . The impact of carbon policy on market equilibrium is studied, and the carbon tax is found to be the most cost-efficient tool to reduce emissions [36] .…”

Value of Storage for Renewable Portfolio Standard

“…Different from their dynamic control approach, we seek to illuminate the value of storage from an algorithmic perspective. Debia et al estimate the marginal value of energy storage in a power market with renewable energy and thermal generation in [9] with a focus on the two-period stylized model. In this paper, we consider a multi-stage decision making problem with risk-limiting constraints to highlight the cost induced by the high RPS.…”

“…The decision making problem is hard to solve due to the non-convexity in the risk-limiting constraint (9). Note that, the parameter Q only affects the reserved capacity ∆ in the optimization problem.…”