The costs of electricity systems with a high share of fluctuating renewables - a stochastic investment and dispatch optimization model for Europe

Renewable energies are meant to produce a large share of the future electricity demand. However, the availability of wind and solar power depends on local weather conditions and therefore weather characteristics must be considered when optimizing the future electricity mix. In this article we analyze the impact of the stochastic availability of wind and solar energy on the cost-minimal power plant mix and the related total system costs. To determine optimal conventional, renewable and storage capacities for different shares of renewables, we apply a stochastic investment and dispatch optimization model to the European electricity market. The model considers stochastic feed-in structures and full load hours of wind and solar technologies and different correlations between regions and technologies. Key findings include the overestimation of fluctuating renewables and underestimation of total system costs compared to deterministic investment and dispatch models. Furthermore, solar technologies are - relative to wind turbines - underestimated when neglecting negative correlations between wind speeds and solar radiation.Stochastic programming; electricity; renewable energy

The economic value of storage in renewable power systems - the case of thermal energy storage in concentrating solar plants

In this article we analyze the value of thermal energy storages in concentrated solar plants depending on the electricity generation mix. To determine the value from a system integrated view we model the whole electricty generation market of the Iberian Peninsula. Key findings for thermal energy storage units in concentrated solar plants include an increasing value in electricity systems with higher shares of fluctuating renewable generation and a potentially significant role in a transformation to a primarily renewable based electricity system. Due to the relatively high investment costs concentrated solar power plants with or without thermal energy storages are not cost efficient in todays electricity markets. However, expected cost reductions due to learning curve effects and higher fluctuating renewable generation may lead to a comparative cost advantage of concentrated solar power plants with thermal energy storages compared to other renewable technologies.Fluctuating renewables; value of storage; concentrated solar power; power plant optimization

Scenarios for an Energy Policy Concept of the German Government

In this working paper we demonstrate how challenging greenhouse gas reduction targets of up to 95% until 2050 can be achieved in the German electricity sector. In the analysis, we focus on the main requirements to reach such challenging targets. To account for interdependencies between the electricity market and the rest of the economy, different models were used to account for feedback loops with all other sectors. We include scenarios with different runtimes and retrofit costs for existing nuclear plants to determine the effects of a prolongation of nuclear power plants in Germany. Key findings for the electricity sector include the importance of a European-wide coordinated electricity grid extension and the exploitation of regional comparative cost effects for renewable sites. Due to political restrictions, nuclear energy will not be available in Germany in 2050. However, the nuclear life time extension has a positive impact on end consumer electricity prices as well as economic growth in the medium term, if retrofit costs do not exceed certain limits.Roadmap 2050; GHG reduction; renewable energies; carbon capture and storage; power plant fleet optimization

Essays on the Economics of Renewable Energy Policy

This thesis includes four essays and deals with two distinct research topics in the context of increasing renewable energy generation shares in the European electricity system. The first topic concerns cross-border cooperation in renewable energy deployment in the European Union. Due to large regional variances in the generation costs of renewable energies across Europe, cross-border cooperation in achieving national renewable energy targets could potentially yield high cost savings. However, few member states intend to use cooperation mechanisms in achieving the 2020 targets. The essays in Chapters 2, 3 and 4 are motivated by this conflict between the potential economic efficiency gains and the observed reality of predominantly national approaches in renewable energy support. In Chapter 2, efficiency gains arising from European-wide cooperation in renewable energy support post-2020 are quantified using an electricity market optimization model. In addition, based on a qualitative analysis of the National Renewable Energy Action Plans, it is found that undesired redistribution effects resulting from cooperation are a major reason why member states of the European Union are reluctant to cooperate. Therefore, in Chapters 3 and 4, redistribution effects associated with cross-border cooperation are investigated in-depth, both theoretically and numerically. These analyses take into account that the different regional deployment of renewable energies resulting from cooperation may affect both renewable energy support payments and regional electricity markets (as long as the different countries are not perfectly physically interconnected). The theoretical analysis shows that effects of cooperation on consumers and total producers per country can only be clearly determined if no grid congestion between the countries exists. Furthermore, when interconnectors are congested, cooperation can, under certain conditions, even lead to a decreasing sectoral welfare in the electricity system of a country. However, in this case, increasing congestion rents ensure that the overall system-wide welfare always increases compared to a situation without cooperation. The numerical analysis shows that, in the European electricity system, the effect of cooperation on regional wholesale electricity markets is not dominant (in most countries). Therefore, in countries with comparatively high (low) generation costs for renewable energies, consumer rents increase (decrease) due to cooperation and producers yield lower (higher) profits. The second topic of this thesis concerns uncertainties in the context of increasing renewable energy shares. In Chapter 5, a multi-stage stochastic optimization model is developed, which is then applied to investigate the impact of uncertain renewable energy deployment paths on optimal investment decisions of conventional power plants. Main findings of this analysis include that plants with a medium capital/operating cost ratio have higher value under uncertainty surrounding renewable energy penetration levels

German Nuclear Policy Reconsidered: Implications for the Electricity Market

In the aftermath of the nuclear catastrophe in Fukushima, German nuclear policy has been reconsidered. This paper demonstrates the economic effects of an accelerated nuclear phase-out on the German electricity generation sector. A detailed optimization model for European electricity markets is used to analyze two scenarios with different lifetimes for nuclear plants (phase-out vs. prolongation). Based on political targets, both scenarios assume significant electricity demand reductions and a high share of generation from renewable energy sources in Germany. Our principal findings are: First, nuclear capacities are mainly replaced by longer lifetimes of existing coal-fired plants and the construction of new gas-fired plants. Second, fossil fuel-based generation and power imports increase, while power exports are reduced in response to the lower nuclear generation. Third, despite the increased fossil generation, challenging climate protection goals can still be achieved within the framework of the considered scenarios. Finally, system costs and electricity prices are clearly higher. We conclude that the generation sector can generally cope with an accelerated nuclear phase-out under the given assumptions. Yet, we emphasize that such a policy requires a substantial and costly transformation of the supply and the demand side.Nuclear policy; climate protection; renewable energy; electricity market modeling