The place beyond the lines – efficient storage allocation in a spatially unbalanced power system with a high share of renewables

Berit Hanna Czock (), Amelie Sitzmann () and Jonas Zinke
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Berit Hanna Czock: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)
Amelie Sitzmann: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

No 2023-1, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: Increasing shares of wind and solar generation serve to decarbonize electricity generation; however, their temporal and spatial variability poses challenges in grid operation. While grid expansion is restricted in the medium term, storage technologies can potentially increase the power systems’ efficiency by temporally aligning generation and demand and increasing network utilization. This paper uses a theoretical and a numerical model to evaluate the optimal allocation of battery storage. In a case study for Germany, we find that batteries can reduce system costs when placed behind the north-south grid bottleneck and near solar power. The supply costs in a setting with uniform prices and a random battery distribution are 9.3% higher than in the theoretical first-best benchmark with nodal prices. An optimal allocation of batteries can reduce this efficiency gap by 0.7 percentage points to 8.6%. This corresponds to almost a doubling of the supply cost savings per euro spent on battery installation. Due to a lack of spatially differentiated investment incentives under the German uniform pricing scheme, batteries have to be allocated by additional policies. Simple allocation rules such as tying battery siting to solar capacity or explicitly identifying a limited number of suitable sites and auctioning capacity can approximate an optimal allocation.

Keywords: Market Design; Electricity Markets; Nodal Pricing; Energy System Modeling; Renewable Energies; Storage; Flexibility; Batteries (search for similar items in EconPapers)
JEL-codes: C61 D47 D61 Q40 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2023-03-23
New Economics Papers: this item is included in nep-ene and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:2023_001

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