Analysis of storage and water value in power systems for policymaking on renewable energies

As variable Renewable Energy Source (vRES) production, e.g., solar and wind, increases, additional Energy Storage (ES) capacity may be desirable in order to manage vRES intermittency. Moreover, since Battery Energy Storage Systems (BESS) cost is expected to decrease in the next 10 to 15 years, intra-day storage, e.g., BESS, dispatch could affect inter-day storage, e.g., hydropower, dispatch and its opportunity costs, i.e., water value. Existing medium- or long-term hydrothermal dispatch models provide the water value only on a weekly or monthly basis and, consequently, neglect hourly water-value signals due to this coarse time resolution. However, short-term BESS decisions in energy and reserve markets have an impact on the water value (or opportunity cost) of long-term storage and should be reflected with a higher degree of precision. We develop a novel, computationally tractable framework for hydr othermal coordination in which hourly storage values (short-term signals) are co-optimized with seasonal storage (long-term water value signals). Thus, hourly opportunity costs, i.e., storage and water values, for inter- and intra-day storage can be obtained considering both short and long-term signals. We analyze a reduced version of Spanish power system, and the results are used to identify possible policy drivers for ES and vRES investments considering the interaction of inter- and intra-day storage.