# Renewables and Advanced Storage in Power Systems: The Iberian Case
## 1 Introduction
Concerning the literature focused on storage, reference [20] is a comprehensive study of the U.S., where long-duration storage compensates for seasonal changes in wind, while short-duration storage (Li-ion batteries) compensates for daily changes in photovoltaics (PV). Another study about long-term storage in the European power system with similar conclusions is presented in [21]. Most of the reviewed papers conclude that arbitrage revenues are not enough to cover investments in storage. Even with participation in reserve or flexibility markets, a capacity mechanism seems necessary for investment recovery. Thus, reference [22] presents a model to set capacity- and energy-based incentives to match revenues and expenses for storage and applies it to a test system. References [17; 23] propose additional revenues from capacity mechanisms and flexibility markets to reach the optimal amount of storage. A price cap is proposed in reference [8] in a general analysis of the need for capacity mechanisms. In an interesting work, [PERSON] et al. [24] conducted a deterministic study on the optimal storage and generation connected to several European markets up to 2050 under the assumption of a capacity auction mechanism. An interesting conclusion is that storage does have capacity value; therefore, storage may benefit from existing capacity incentives. Reference [25] also presents conclusions about storage profitability in European markets from past data, whose conclusions are similar. This paper presents a study on the Iberian power system (Spain and Portugal) for the envisaged renewable energy targets. Investment and operation costs are minimized under different assumptions of storage cost and carbon price. Two storage technologies, batteries, and hydro pumping storage, are considered. The uncertainty in storage costs has been modelled using the two-point estimate method. In this way, the effect of storage cost uncertainty on the optimal deployment of renewables can be easily assessed. This method has not been applied in the examined literature and may have application for other uncertainty studies. The conditions of future storage facilities to arrive at profitability are set and explained. The intended contributions of this paper are the assessment of the uncertainty of storage costs in generation planning with low computational cost, as well as the conditions under which the arbitrage in electricity markets may cover the investment costs of storage. Another contribution is to consider the storage capacity as an optimization variable to check if the envisaged progress of storage technologies would cover power system needs. The paper is organized as follows. Section 2 presents the storage technologies, particularly those used in the paper. Section 3 gives the mathematical background for the uncertainty/sensitivity study. Section 4 presents the National Energy and Climate Plans for Spain and Portugal, and the data used for the study. Results are given and commented on in Section 5. Section 6 concludes the paper with a summary of the main findings. Two appendices include the optimization problem equations and the preliminary study to select the thermal technologies included in the optimization process.