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Optimising VRE capacity in Renewable Energy Zones

Paul Simshauser (), Farhad Billimoria and Craig Rogers

Energy Economics, 2022, vol. 113, issue C

Abstract: Australia experienced significant growth in variable renewable energy (VRE) investment commitments during 2016–2021. A subset of projects experienced material entry frictions which stemmed from inadequate network hosting capacity. In this article we examine the development of Renewable Energy Zones (REZ) as a means by which to help guide forward market commitments and produce greater coordination between generation and transmission plant investments. Using an optimisation model comprising 1500 MW of transmission network infrastructure, we explore various definitions of a ‘fully subscribed REZ’ given portfolio benefits associated with complementary wind and solar resources in Southern Queensland. When minimising cost forms the objective function, full subscription is achieved by developing 2050 MW of VRE, comprising 1700 MW of wind and 350 MW of solar. When maximising output forms the objective function, ~3400 MW of wind and solar is developed in roughly equal proportions, accepting some curtailment is an economic result. And if maximising net cashflows forms the objective, VRE development is complicated by the dynamic nature of spot prices. Specifically, in the early stages of a REZ solar is preferred but as its market share rises and value of output falls, wind investments dominate holding technology costs constant.

Keywords: Renewable Energy Zones; Renewable generation; Transmission investment (search for similar items in EconPapers)
JEL-codes: D25 D80 G32 L51 Q41 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.eneco.2022.106239

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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