Designing Cost-Efficient, Flexible, Energy Solutions for a Decarbonized GB Power System

Hanzhe Xing, Stuart Miles and John

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Decarbonised future power systems will rely on variable renewable energy (VRE). The variability and intermittence of VRE calls for cost-efficient flexibility providers, such as thermal generators, different energy storage technologies, interconnectors, and excess generation from VRE. This research decomposes the total system cost into cost of flexibility and energy, and constructs an agent-based structure for energy storage operators to price stored energy and a mechanism for all power sources to compete with each other. In the GB power system with the UK's projected VRE and energy storage capacity, the total system cost will be dominated by the cost of providing energy flexibility. Energy storage is more efficient both at reducing total system cost and carbon intensity than additional VRE, which can only reduce carbon intensity, and interconnectors, which can only reduce total system cost by exporting excess generation from VRE. Thermal generators will pay a transfer cost because of their frequent start-up and will still be cost-efficient for seasonal storage. Excess generation from additional VRE reduces carbon intensity but raises the total system cost. To reach the minimum carbon intensity and total system cost, we recommend that the GB power system introduce an additional 25 GW of storage capacity for its projected VRE capacity and introduce mechanical storage technologies which are cost-efficient for managing short-term variability as soon as possible.

Date: 2024-12-18
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2474

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