Modeling the interplay between storage and flexibility in power systems

Field: Energy (Physical Sciences)

The need for a more resource-efficient and low-carbon electricity sector has boosted the integration of Renewable Energy Sources (RES) in power systems, especially of wind and solar energy. However, their intermittent output hinders the match of electricity demand and supply which is required for the smooth operation of the electricity grid. This problem is translated into higher electricity price, higher CO2 emissions due to the need for back-up electricity from fossil fuel plants, and even jeopardy of the reliable electricity services provision. Electricity storage is considered to be an effective way to address these issues and enhance system flexibility. The objective of this work is to assess the contribution of storage to cost and CO2 emissions reduction in the electricity system, to estimate its profitability as an investment option and to examine the interactions between energy storage and the other actors involved in the operation of an electricity system. The storage performance under the presence of the electricity transmission option for balancing purposes in the system was also examined. The methodology applied to carry out this research is modeling a power system on MS Excel. For the last part of the objective mentioned above, the model results were combined with a stakeholder analysis. The project is implemented in collaboration with Shell Global Solutions International BV. During the conceptualization phase of the model building process, a literature review was conducted in order to explore the outcome of previous studies on the value of energy storage, the applications of storage in power systems and the technologies available. Moreover, a research on the electricity markets operation was carried out in order to identify the elements of a power system model and their interconnections. Then, the model deliverables and structure were defined and desk research was conducted for the collection of the necessary input data. The simulation is based on the power system of Germany, since this is a system with high wind and solar capacity. After an iterative process of verification, validation and specifications adjustment, the model got its final form and sensitivity analysis tests were performed. Firstly, different strategies of storage use with respect to the charge/discharge policy, the storage capacity in the system and the type of storage used, were tested under the current system conditions. The results confirmed that storage can reduce the cost of system while generating profit for the storage operators but this is only possible for the pumped-hydro installations. Vanadium redox batteries also reduce the cost of the system but to a lower extent; moreover, they are not yet economically viable. It was also proved that, although storage facilities are mostly charged in the spot market, discharging energy in the balancing market is the main source of profitability from storage operation. Therefore, the variations in the flexibility reserve required in the system affect a lot the storage provider’s profits, which may fluctuate significantly from year to year. On the other hand, the economic value of storage for the system remains around the same level regardless the fluctuations of flexibility reserve in the system. With respect to the combination of storage and transmission in the balancing market, the research showed that transmission is a competitive option which affects storage profitability but does not influence a lot the value of storage for the system. Finally, in terms of environmental performance, storage seems to increase CO2 emissions in the system because it is mostly charged by lignite plants. However, this is highly subject to the current merit order formulation (lignite plants, coal plants, CCGT in ascending marginal cost order) and changes when CCGT gets cheaper than the other plants. The second round of tests looked into storage performance under different system conditions. It was found out that more aggressive RES penetration in the system showcases the value of storage for the system. The profitability of storage also increases but when RES penetration becomes very high the electricity price spread in the spot market reduces and affects negatively the profitability for the storage provider. On the contrary, the increase in the level of electricity demand initially devalues storage for both actors, because it decreases the electricity price spread and the frequency of storage facilities use. However, when demand becomes very high and the current installed capacity cannot cover it, storage regains its value. The impact of fuel and CO2 prices variation on storage is also attributed to the effect of this variation on the electricity price spread. Under the current merit order structure (lignite, coal, CCGT), the decrease in CO2 price and the rise in gas price enhance the value of storage, while all the other changes either decrease or totally eliminate it. Finally, the increase in the predictability of wind and solar variations reduces significantly the value of storage. The same is true for the increase in the amount of electricity transmitted to an external system, but to a smaller extent. The last part of the research project, the stakeholder analysis, shed light on the interrelations of storage with the other actors involved in power systems. Under the current system conditions, the consumers, the providers of electricity from intermittent RES and especially lignite plants operators are affected positively by the introduction of storage in the energy system. Gas plants are also benefited from storage integration but to a limited extent. The impact on the other electricity providers (nuclear, biomass, hydro, coal) is negative but small. However, it must be mentioned that since storage facilitates the penetration of RES, the electricity suppliers from fossil fuel power plants are also threatened by the reduction of their share in the energy mix. Therefore, the impact of storage on their profits might be negative in the long run. The most important players for the storage deployment in power systems are of course the government, since it is at the head of the energy storage policy; the storage providers who invest on the technology; and the fossil fuel power plant operators, who hold very powerful position in the system. In terms of recommendations derived from the project, it is proposed to storage investors to support RD or in vanadium redox batteries, when they become profitable. In relation to the storage operation plan, they should participate in both spot and balancing market and perform a thorough study on the price fluctuations in the electricity markets before designing a charging/discharging strategy. To the policy makers, it is advised to offer subsidies for the currently unprofitable but most promising storage technologies and to enhance RD the modeling of electricity transmission in spot market; and the impact assessment of storage on stakeholders under different scenarios and for various storage use strategies.