IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v82y2023ics0957178723000905.html
   My bibliography  Save this article

Economic evaluation of variable renewable energy participation in U.S. ancillary services markets

Author

Listed:
  • Kim, James Hyungkwan
  • Kahrl, Fredrich
  • Mills, Andrew
  • Wiser, Ryan
  • Montañés, Cristina Crespo
  • Gorman, Will

Abstract

Variable renewable energy (VRE) is not yet meaningfully participating in U.S. ancillary services (AS) markets. VRE participation in AS markets could provide a new source of revenue for VRE resource owners to offset declining energy and capacity values and a new tool for power system operators to address emerging system constraints. This paper uses a price-taker dispatch model and historical prices to estimate the economic value of standalone and hybrid (battery-paired) VRE participation in AS markets, from the resource owner and electricity system perspectives, in each of the seven U.S. independent system operator and regional transmission organization (ISO/RTO) markets where ancillary service prices are set. Across ISO/RTO markets, average (2015–2019) simulated incremental revenues from power regulation market participation were $0.0–2.9/MWh (+0–15% of revenue without participation) for standalone VRE owners and $1–33/MWh (+1–69%) for hybrid VRE owners. However, ISO/RTO reserve markets are relatively thin and have the potential to become saturated by energy storage projects that are currently in ISO/RTO interconnection queues. In most markets, standalone and hybrid VRE could provide power regulation reserves during periods with high power regulation prices, suggesting that VRE participation in AS markets could have high system value. The analysis highlights the relevance of separate upward and downward power regulation products and indicates that ISOs/RTOs might consider initially focusing on enabling hybrid VRE provision of AS.

Suggested Citation

  • Kim, James Hyungkwan & Kahrl, Fredrich & Mills, Andrew & Wiser, Ryan & Montañés, Cristina Crespo & Gorman, Will, 2023. "Economic evaluation of variable renewable energy participation in U.S. ancillary services markets," Utilities Policy, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:juipol:v:82:y:2023:i:c:s0957178723000905
    DOI: 10.1016/j.jup.2023.101578
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178723000905
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2023.101578?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fernandes, Camila & Frías, Pablo & Reneses, Javier, 2016. "Participation of intermittent renewable generators in balancing mechanisms: A closer look into the Spanish market design," Renewable Energy, Elsevier, vol. 89(C), pages 305-316.
    2. Tsai, Chen-Hao, 2021. "Operating reserves in the three most windy U.S. power markets: A technical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    3. Guannan He & Qixin Chen & Panayiotis Moutis & Soummya Kar & Jay F. Whitacre, 2018. "An intertemporal decision framework for electrochemical energy storage management," Nature Energy, Nature, vol. 3(5), pages 404-412, May.
    4. Edmunds, Calum & Martín-Martínez, Sergio & Browell, Jethro & Gómez-Lázaro, Emilio & Galloway, Stuart, 2019. "On the participation of wind energy in response and reserve markets in Great Britain and Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 115(C).
    5. Rodríguez-Sarasty, Jesús A. & Debia, Sébastien & Pineau, Pierre-Olivier, 2021. "Deep decarbonization in Northeastern North America: The value of electricity market integration and hydropower," Energy Policy, Elsevier, vol. 152(C).
    6. Zarnikau, J. & Woo, C.K. & Zhu, S. & Tsai, C.H., 2019. "Market price behavior of wholesale electricity products: Texas," Energy Policy, Elsevier, vol. 125(C), pages 418-428.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hugo Algarvio & Fernando Lopes & António Couto & Ana Estanqueiro, 2019. "Participation of wind power producers in day‐ahead and balancing markets: An overview and a simulation‐based study," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 8(5), September.
    2. Lavin, Luke & Apt, Jay, 2021. "The importance of peak pricing in realizing system benefits from distributed storage," Energy Policy, Elsevier, vol. 157(C).
    3. Beuse, Martin & Dirksmeier, Mathias & Steffen, Bjarne & Schmidt, Tobias S., 2020. "Profitability of commercial and industrial photovoltaics and battery projects in South-East-Asia," Applied Energy, Elsevier, vol. 271(C).
    4. Dolter, Brett & Fellows, G. Kent & Rivers, Nicholas, 2022. "The cost effectiveness of new reservoir hydroelectricity: British Columbia’s Site C project," Energy Policy, Elsevier, vol. 169(C).
    5. Angelica, Gianfreda & Lucia, Parisio & Matteo, Pelagatti, 2017. "The RES-induced Switching Effect Across Fossil Fuels: An Analysis of the Italian Day-Ahead and Balancing Prices and Their Connected Costs," Working Papers 360, University of Milano-Bicocca, Department of Economics, revised 03 Feb 2017.
    6. Sun, Shilin & Wang, Tianyang & Chu, Fulei, 2022. "In-situ condition monitoring of wind turbine blades: A critical and systematic review of techniques, challenges, and futures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    7. Hugo Algarvio & Fernando Lopes & António Couto & Ana Estanqueiro & João Santana, 2019. "Variable Renewable Energy and Market Design: New Products and a Real-World Study," Energies, MDPI, vol. 12(23), pages 1-17, November.
    8. Xiaolin Ayón & María Ángeles Moreno & Julio Usaola, 2017. "Aggregators’ Optimal Bidding Strategy in Sequential Day-Ahead and Intraday Electricity Spot Markets," Energies, MDPI, vol. 10(4), pages 1-20, April.
    9. Arcos-Vargas, A. & Nuñez, F. & Román-Collado, R., 2020. "Short-term effects of PV integration on global welfare and CO2 emissions. An application to the Iberian electricity market," Energy, Elsevier, vol. 200(C).
    10. Brown, D.P. & Tsai, C.H. & Woo, C.K. & Zarnikau, J. & Zhu, S., 2020. "Residential electricity pricing in Texas's competitive retail market," Energy Economics, Elsevier, vol. 92(C).
    11. Brijs, Tom & De Jonghe, Cedric & Hobbs, Benjamin F. & Belmans, Ronnie, 2017. "Interactions between the design of short-term electricity markets in the CWE region and power system flexibility," Applied Energy, Elsevier, vol. 195(C), pages 36-51.
    12. Debia, Sébastien & Pineau, Pierre-Olivier & Siddiqui, Afzal S., 2021. "Strategic storage use in a hydro-thermal power system with carbon constraints," Energy Economics, Elsevier, vol. 98(C).
    13. Gianfreda, Angelica & Parisio, Lucia & Pelagatti, Matteo, 2018. "A review of balancing costs in Italy before and after RES introduction," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 549-563.
    14. Tsai, Chen-Hao, 2021. "Operating reserves in the three most windy U.S. power markets: A technical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    15. Agostini, Claudio A. & Armijo, Franco A. & Silva, Carlos & Nasirov, Shahriyar, 2021. "The role of frequency regulation remuneration schemes in an energy matrix with high penetration of renewable energy," Renewable Energy, Elsevier, vol. 171(C), pages 1097-1114.
    16. Koh, S.C.L. & Smith, L. & Miah, J. & Astudillo, D. & Eufrasio, R.M. & Gladwin, D. & Brown, S. & Stone, D., 2021. "Higher 2nd life Lithium Titanate battery content in hybrid energy storage systems lowers environmental-economic impact and balances eco-efficiency," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    17. Abiodun, Kehinde & Hood, Karoline & Cox, John L. & Newman, Alexandra M. & Zolan, Alex J., 2023. "The value of concentrating solar power in ancillary services markets," Applied Energy, Elsevier, vol. 334(C).
    18. Li, Raymond & Woo, Chi-Keung & Tishler, Asher & Zarnikau, Jay, 2022. "Price responsiveness of commercial demand for natural gas in the US," Energy, Elsevier, vol. 256(C).
    19. Xiangxin Meng & Yakun Zhang & Zekun Wu & Wenzhe Tang, 2023. "Enhancing Operations Management of Pumped Storage Power Stations by Partnering from the Perspective of Multi-Energy Complementarity," Energies, MDPI, vol. 16(19), pages 1-19, October.
    20. Zarnikau, J. & Zhu, S. & Woo, C.K. & Tsai, C.H., 2020. "Texas's operating reserve demand curve's generation investment incentive," Energy Policy, Elsevier, vol. 137(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:82:y:2023:i:c:s0957178723000905. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.