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On the Role of Electricity Storage in Capacity Remuneration Mechanisms

Fraunholz, Christoph; Keles, Dogan; Fichtner, Wolf

In electricity markets around the world, the substantial increase of intermittent renewable electricity generation has intensified concerns about generation adequacy, ultimately driving the implementation of capacity remuneration mechanisms. Although formally technology-neutral, substantial barriers often exist in these mechanisms for non-conventional capacity such as electricity storage. In this article, we provide a rigorous theoretical discussion on design parameters and show that the concrete design of a capacity remuneration mechanism always creates a bias towards one technology or the other. In particular, we can identify the bundling of capacity auctions with call options and the definition of the storage capacity credit as essential drivers affecting the future technology mix as well as generation adequacy. In order to illustrate and confirm our theoretical findings, we apply an agent-based electricity market model and run a number of simulations. Our results show that electricity storage has a capacity value and should therefore be allowed to participate in any capacity remuneration mechanism. Moreover, we find the implementation of a capacity remuneration mechanism with call options and a strike price to increase the competitiveness of storages against conventional power plants. ... mehr

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DOI: 10.5445/IR/1000104471
Veröffentlicht am 19.12.2019
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Industriebetriebslehre und Industrielle Produktion (IIP)
Publikationstyp Forschungsbericht/Preprint
Publikationsjahr 2019
Sprache Englisch
Identifikator ISSN: 2196-7296
KITopen-ID: 1000104471
Verlag KIT, Karlsruhe
Umfang 42 S.
Serie Working Paper Series in Production and Energy ; 37
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