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Policy Brief—Using Lessons from Reverse Auctions for Renewables to Deliver Energy Storage Capacity: Guidance for Policymakers

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  • Maureen Lackner
  • Steven Koller
  • Jonathan R Camuzeaux

Abstract

As renewable technologies grow cheaper, intermittency is emerging as a critical challenge for achieving large-scale renewables deployment in the electric power sector. Energy storage is particularly well suited to help integrate renewables into the power sector’s energy mix because of its ability to store excess energy when prices are low, which can then be discharged when prices are high (i.e., energy arbitrage). Based on recent literature, existing data, and conversations with technical experts, this policy brief explores whether reverse auctions, a market-based tool widely used to procure renewables capacity, might also be cost effective for energy storage procurement. Past experience with renewable energy procurement and early evidence from battery storage systems suggest that reverse auctions are a valuable policy tool for driving down the prices of new storage capacity. However, auction design is important not only for competition and price discovery, but also to encourage the participation of developers of innovative technologies and to guarantee timely delivery of new capacity. In particular, we encourage policymakers to consider the multiple grid services that storage systems can provide in order to ensure that reverse auction frameworks accurately price and capture the value of storage system services in meeting electric power grid demand.

Suggested Citation

  • Maureen Lackner & Steven Koller & Jonathan R Camuzeaux, 2019. "Policy Brief—Using Lessons from Reverse Auctions for Renewables to Deliver Energy Storage Capacity: Guidance for Policymakers," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(1), pages 140-148.
    • Handle: RePEc:oup:renvpo:v:13:y:2019:i:1:p:140-148.
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    File URL: http://hdl.handle.net/10.1093/reep/rey019
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    Cited by:

    1. Natsuko Toba & Tooraj Jamasb & Luiz Maurer & Anupama Sen, 2024. "Multi-objective Auctions for Utility-Scale Solar Battery Systems: Lessons for ASEAN and East Asia," Economics, Law, and Institutions in Asia Pacific, in: Han Phoumin & Rabindra Nepal & Fukunari Kimura & Farhad Taghizadeh-Hesary (ed.), Large-Scale Development of Renewables in the ASEAN, chapter 0, pages 21-53, Springer.
    2. Ali Darudi & Hannes Weigt, 2024. "Review and Assessment of Decarbonized Future Electricity Markets," Energies, MDPI, vol. 17(18), pages 1-38, September.
    3. Jiang, Meihui & An, Haizhong & Gao, Xiangyun & Liu, Donghui & Jia, Nanfei & Xi, Xian, 2020. "Consumption-based multi-objective optimization model for minimizing energy consumption: A case study of China," Energy, Elsevier, vol. 208(C).

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