Integration costs revisited – An economic framework for wind and solar variability

Lion Hirth (), Falko Ueckerdt and Ottmar Edenhofer

Renewable Energy, 2015, vol. 74, issue C, 925-939

Abstract: The integration of wind and solar generators into power systems causes “integration costs” – for grids, balancing services, more flexible operation of thermal plants, and reduced utilization of the capital stock embodied in infrastructure, among other things. This paper proposes a framework to analyze and quantify these costs. We propose a definition of integration costs based on the marginal economic value of electricity, or market value – as such a definition can be more easily used in economic cost-benefit assessment than previous approaches. We suggest decomposing integration costs intro three components, according to the principal characteristics of wind and solar power: temporal variability, uncertainty, and location-constraints. Quantitative estimates of these components are extracted from a review of 100 + published studies. At high penetration rates, say a wind market share of 30–40%, integration costs are found to be 25–35 €/MWh, i.e. up to 50% of generation costs. While these estimates are system-specific and subject to significant uncertainty, integration costs are certainly too large to be ignored in high-penetration assessments (but might be ignored at low penetration). The largest single factor is reduced utilization of capital embodied in thermal plants, a cost component that has not been accounted for in most previous integration studies.

Keywords: Wind power; Solar power; Integration cost; Variable renewables (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (165)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:74:y:2015:i:c:p:925-939

DOI: 10.1016/j.renene.2014.08.065

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