Due to the recommendations of the IPCC Global Warming report [ 1 ], CO2 emissions have to be halved by 2030 in order to avoid devastating changes to our climate. The 2030 climate and energy framework [ 2 ] that was adopted by the European Union in 2014 has the target to cut 40% of greenhouse gas emissions; to achieve a 32% share of renewable energy and a 32% improvement in energy efficiency by 2030. Since 2018, the European Commission has been working on an even more ambitious project that is to be carbon neutral by 2050 [ 3 ]. The goal is crystal clear. What is often not clear at all, it is how to reach these ambitious goals both from a technical and regulatory point of view. The two-step approach talks about (A) deploying existing clean technologies at an unprecedented scale while developing new, cleaner, and more efficient technologies under step (B). By doing so, the two-step approach tackles the technical roadmap to a carbon-neutral future. It aims at answering questions such as what should be done, how many TW of each technology to install or, what new technologies should be developed to achieve the established targets. One crucial regulatory question that is often neglected is how to achieve these goals by making them profitable in a liberalized market framework? Putting it more drastically: if we are expecting new investments at an unprecedented scale in technologies such as solar, wind, storage technologies, nuclear etcetera, how do we make those investments attractive for private investors? Just because technically speaking, an energy system could be carbon-neutral, that does not mean that by itself, the system will evolve in this direction. Let us consider the electricity sector, for example. In most developed countries, the electricity sector is liberalized, which means that private profit-maximizing entities compete in a market setting. Under the current market rules, this massive deployment of carbon-free technologies would mean a steep decrease in companies' profits. Meaning that in practice, even though the environment might be better off, companies might not want to adopt these measures out of fear of losing money or going bankrupt. The point that we want to raise is that developing the right market framework and incentives is just as essential as developing new and more efficient technologies. If we cannot 'show private investors the money,' then the transition to a carbon-free energy system is very likely not going to happen at the desired pace. In order to point out the possibly large gap between what is technically feasible and what is economically viable, inspired by the 2013 NREL report [ 4 ] with this research, we want to focus on the value of storage technologies in the electric power system. To that purpose, we have developed a novel optimization model that takes both expansions (transmission investment, generation investment in thermal, renewable, and storage technologies) and operating decisions in a transmission network. This model takes into account optimal power flow via second-order cone programming, which allows us to model both active and reactive power. While reactive power does not seem to be an issue in most power systems currently, in a carbon-free power system where most thermal dispatchable plants have been shut down, reactive power and inertia support becomes an important issue when it comes to system stability and security. Therefore, it is vital to be able to keep track of reactive power and inertia in planning models, which we demonstrate in our case studies. Moreover, when planning the optimal power system of the future, our model accounts for realistic unit-commitment type operating constraints such as start-up, shut-down, or ramping constraints. In a case study, we compare two power systems: the current and the future power system (with corresponding 2030/2050 targets). We first analyze the obtained optimal technology mix and possible transmission expansions. Then, we calculate the profits obtained by storage technologies under a current market regime (spot and reserve markets). We discuss how the massive penetration of variable renewable energy sources as well as other generation technologies affect the profitability and return on investment of storage technologies, motivating the discussion of whether under a current competitive market scheme, this exact amount of storage would be likely actually to be built. We analyze other technical problems such as the lack of inertia and minimum reactive power constraints in resulting power systems. Moreover, we assess whether existing markets still have the same meaning under a carbon-free scheme or whether they become obsolete. Finally, and in order to provide new ideas for potential new markets, we include the remuneration of markets for reactive power, and markets for system inertia to see to what extent such markets could affect the profitability of storage investments.
|Publication status||Published - 2020|
|Event||Applied Energy Symposium MIT A+B - Cambridge, United States|
Duration: 12 Aug 2020 → 14 Aug 2020
|Conference||Applied Energy Symposium MIT A+B|
|Period||12/08/20 → 14/08/20|