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Electricity storage and transmission: Complements or substitutes?

Paul Neetzow, Anna Pechan and Klaus Eisenack ()

Energy Economics, 2018, vol. 76, issue C, 367-377

Abstract: Electricity from renewable sources often cannot be generated when and where it is needed. To deal with these temporal and spatial discrepancies, one frequently proposed approach is to expand storage capacities and transmission grids. It is often argued that the two technologies substitute each other, such that deploying one reduces the need for the other. Using a theoretical model, we show that storage capacities and transmission grids can also be complements if electricity system costs are minimized. We present the conditions that determine the kind of interdependence at specific storage locations: the characteristics of transmission congestion, i.e., during peak or off-peak and uni- or bidirectional as well as the alignment of marginal generation costs between adjacent regions. By applying our theoretical insights to Italian power system data, we obtain empirical evidence that storage and transmission can act as either substitutes or complements. Planners of long-lasting and costly infrastructure can use the results to avoid design errors such as a misplacement of storage within the system.

Keywords: Power grid; Energy system; Infrastructure planning; Energy transition (search for similar items in EconPapers)
JEL-codes: C61 D24 L94 Q41 Q42 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:76:y:2018:i:c:p:367-377

DOI: 10.1016/j.eneco.2018.10.021

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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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