How do demand response and electrical energy storage affect (the need for) a capacity market?
Authored by Vries Laurens J de, Agha Salman M Khan, Remco A Verzijlbergh, Ozgur Can Sakinci
Date Published: 2018
DOI: 10.1016/j.apenergy.2018.01.057
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Abstract
To ensure security of supply and incentivize reliable investment in
generation capacity, capacity markets (CMs) have been implemented or are
being considered. However, demand response (DR) and electrical energy
storage (EES) also contribute to system adequacy. In this paper, we
analyse the change in the need for a CM if DR and EES are available, in
the presence of a growing portfolio share of intermittent renewable
energy sources electricity (RES-E). We present a novel hybrid
electricity market model of the transition to a low-carbon electricity
system which uses optimization for short-term market operations and
agent-based simulation of long-term decisions.
DR and EES may significantly reduce the risk of shortages in an
energy-only market, even if investment decisions are myopic, like in our
model, as compared to an energy-only market without flexibility options.
We also present a novel mechanism for contribution of EES to the CM.
This reduces the cost of the CM and improves the business case for EES.
In our model, DR and EES achieve almost the same improvement of security
of supply as a CM, but they do so at a lower cost. Therefore, the case
for a centralized CM is weakened in a system with even a limited share
of DR and medium-term EES, as presented in our model. These results
depend on the duration of scarcity events and the cost of EES and DR.
Refinement of the model representation will be required to extrapolate
these conclusions to real markets with other types of DR, EES and CMs.
Tags
Demand response
Optimization
Model
renewable energy
Mechanisms
Impact
Generation
Price
Power-systems
Side management
Agent-based
modelling
Capacity market
Electrical energy storage
System adequacy
High portfolio share
Economic viability
Price arbitrage
Cost-analysis
Economic
viability