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Locational Marginal Network Tariffs for Intermittent Renewable Generation

Author

Listed:
  • Tangerås, Thomas

    (Research Institute of Industrial Economics (IFN))

  • Wolak, Frank A.

    (Program on Energy and Sustainable Development and Department of Economics)

Abstract

The variability of solar and wind generation increases transmission network operating costs associated with maintaining system stability. These ancillary services costs are likely to increase as a share of total energy costs in regions with ambitious renewable energy targets. We examine how efficient deployment of intermittent renewable generation capacity across locations depends on the costs of balancing real-time system demand and supply. We then show how locational marginal network tariffs can be designed to implement the efficient outcome for intermittent renewable generation unit location decisions. We demonstrate the practical applicability of this approach by applying our theory to obtain quantitative results for the California electricity market.​

Suggested Citation

  • Tangerås, Thomas & Wolak, Frank A., 2019. "Locational Marginal Network Tariffs for Intermittent Renewable Generation," Working Paper Series 1310, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1310
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    References listed on IDEAS

    as
    1. Duncan S. Callaway & Meredith Fowlie & Gavin McCormick, 2018. "Location, Location, Location: The Variable Value of Renewable Energy and Demand-Side Efficiency Resources," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 39-75.
    2. Novacheck, Joshua & Johnson, Jeremiah X., 2017. "Diversifying wind power in real power systems," Renewable Energy, Elsevier, vol. 106(C), pages 177-185.
    3. Shahriari, Mehdi & Blumsack, Seth, 2018. "The capacity value of optimal wind and solar portfolios," Energy, Elsevier, vol. 148(C), pages 992-1005.
    4. Frank A. Wolak, 2016. "Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    5. Steven E. Sexton & A. Justin Kirkpatrick & Robert Harris & Nicholas Z. Muller, 2018. "Heterogeneous Environmental and Grid Benefits from Rooftop Solar and the Costs of Inefficient Siting Decisions," NBER Working Papers 25241, National Bureau of Economic Research, Inc.
    6. Frank A. Wolak, 2016. "Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California," NBER Working Papers 22494, National Bureau of Economic Research, Inc.
    7. Frank Wolak, 2016. "Level versus Variability Trade-Offs in Wind and Solar Generation Investments: The Case of California," Working Papers id:11201, eSocialSciences.
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    Cited by:

    1. Jeddi, Samir & Sitzmann, Amelie, 2021. "Network tariffs under different pricing schemes in a dynamically consistent framework," EWI Working Papers 2021-1, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

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    More about this item

    Keywords

    Ancillary services costs; Efficiency; Locational marginal network tariffs; Renewable electricity generation; System stability;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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