Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194133
Authors: 
Abrell, Jan
Rausch, Sebastian
Streitberger, Clemens
Year of Publication: 
2019
Series/Report no.: 
Economics Working Paper Series 19/310
Abstract: 
Mitigating climate change will require integrating large amounts of highly intermittent renewable energy (RE) sources in future electricity markets. Considerable uncertainties exist about the cost and availability of future large-scale storage to alleviate the potential mismatch between demand and supply. This paper examines the suitability of regulatory (public policy) mechanisms for coping with the volatility induced by intermittent RE sources, using a numerical equilibrium model of a future wholesale electricity market. We find that the optimal RE subsidies are technology-specific reflecting the heterogeneous value for system integration. Differentiated RE subsidies reduce the curtailment of excess production, thereby preventing costly investments in energy storage. Using a simple cost-benefit framework, we show that a "smart" design of RE support policies significantly reduces the level of optimal storage. We further find that the marginal benefits of storage rapidly decrease for short-term (intra-day) storage and are small for long-term (seasonal) storage independent of the storage level. This suggests that storage is not likely to be the limiting factor for decarbonizing the electricity sector.
Subjects: 
Renewable Energy
Electricity
Volatility
Intermittency
Storage
Technology-specific Regulation
Subsidies
Energy Policy
Climate Policy
JEL: 
C63
Q42
Q48
Q54
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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