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The Economics of Wind Power with Energy Storage

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  • Pablo Benitez
  • Lilianna Dragulescu
  • G. Cornelis van Kooten

Abstract

We develop a nonlinear mathematical optimization program for investigating the economic and environmental implications of wind penetration in electrical grids and evaluating how hydropower storage could be used to offset wind power intermittence. When wind power is added to an electrical grid consisting of thermal and hydropower plants, it increases system variability and results in a need for additional peak-load, gas-fired generators. Our empirical application using load data for Alberta’s electrical grid shows that 32% wind penetration (normalized to peak demand) results in a net cost increase of $C5.20/ MWh, while 64% wind penetration could result in an increase of $12.50/MWh. Costs of reducing CO2 emissions are estimated to be $41-$56 per t CO2 . When pumped hydro storage is introduced in the system or the capacity of the water reservoirs is enhanced, the hydropower facility could provide most of the peak load requirements obviating the need to build large peak-load gas generators.

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File URL: https://web.uvic.ca/~repa/publications/REPA%20working%20papers/WorkingPaper2006-02.pdf
File Function: Final version, 2006
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Bibliographic Info

Paper provided by University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group in its series Working Papers with number 2006-02.

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Length: 37 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:rep:wpaper:2006-02

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Related research

Keywords: Renewable energy; carbon costs; hydropower storage; mathematical programming;

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Cited by:
  1. Daniel T. Kaffine & Brannin J. McBee & Jozef Lieskovsky, 2012. "Emissions savings from wind power generation: Evidence from Texas, California and the Upper Midwest," Working Papers 2012-03, Colorado School of Mines, Division of Economics and Business.
  2. Mauritzen, Johannes, 2012. "Dead Battery? Wind Power, the Spot Market, and Hydro Power Interaction in the Nordic Electricity Market," Working Paper Series 908, Research Institute of Industrial Economics.
  3. Kapsali, M. & Kaldellis, J.K., 2010. "Combining hydro and variable wind power generation by means of pumped-storage under economically viable terms," Applied Energy, Elsevier, vol. 87(11), pages 3475-3485, November.
  4. Blumsack, Seth & Xu, Jianhua, 2011. "Spatial variation of emissions impacts due to renewable energy siting decisions in the Western U.S. under high-renewable penetration scenarios," Energy Policy, Elsevier, vol. 39(11), pages 6962-6971.
  5. Abolhosseini, Shahrouz & Heshmati, Almas & Altmann, Jörn, 2014. "The Effect of Renewable Energy Development on Carbon Emission Reduction: An Empirical Analysis for the EU-15 Countries," IZA Discussion Papers 7989, Institute for the Study of Labor (IZA).
  6. Connolly, D. & Lund, H. & Finn, P. & Mathiesen, B.V. & Leahy, M., 2011. "Practical operation strategies for pumped hydroelectric energy storage (PHES) utilising electricity price arbitrage," Energy Policy, Elsevier, vol. 39(7), pages 4189-4196, July.
  7. Nyamdash, Batsaikhan & Denny, Eleanor, 2013. "The impact of electricity storage on wholesale electricity prices," Energy Policy, Elsevier, vol. 58(C), pages 6-16.
  8. Kaldellis, J.K. & Kapsali, M. & Kavadias, K.A., 2010. "Energy balance analysis of wind-based pumped hydro storage systems in remote island electrical networks," Applied Energy, Elsevier, vol. 87(8), pages 2427-2437, August.
  9. Abolhosseini, Shahrouz & Heshmati, Almas & Altmann, Jörn, 2014. "A Review of Renewable Energy Supply and Energy Efficiency Technologies," IZA Discussion Papers 8145, Institute for the Study of Labor (IZA).
  10. Denault, Michel & Dupuis, Debbie & Couture-Cardinal, Sébastien, 2009. "Complementarity of hydro and wind power: Improving the risk profile of energy inflows," Energy Policy, Elsevier, vol. 37(12), pages 5376-5384, December.
  11. Delucchi, Mark A. & Jacobson, Mark Z., 2011. "Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies," Energy Policy, Elsevier, vol. 39(3), pages 1170-1190, March.
  12. Muche, Thomas, 2009. "A real option-based simulation model to evaluate investments in pump storage plants," Energy Policy, Elsevier, vol. 37(11), pages 4851-4862, November.
  13. Kosnik, Lea, 2010. "The potential for small scale hydropower development in the US," Energy Policy, Elsevier, vol. 38(10), pages 5512-5519, October.
  14. Jure Margeta & Zvonimir Glasnovic, 2011. "Hybrid RES-HEP Systems Development," Water Resources Management, Springer, vol. 25(9), pages 2219-2239, July.
  15. Ardizzon, G. & Cavazzini, G. & Pavesi, G., 2014. "A new generation of small hydro and pumped-hydro power plants: Advances and future challenges," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 746-761.
  16. Díaz-González, Francisco & Sumper, Andreas & Gomis-Bellmunt, Oriol & Villafáfila-Robles, Roberto, 2012. "A review of energy storage technologies for wind power applications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 2154-2171.
  17. Yang Gu & James McCalley & Ming Ni & Rui Bo, 2013. "Economic Modeling of Compressed Air Energy Storage," Energies, MDPI, Open Access Journal, vol. 6(4), pages 2221-2241, April.

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