The effectiveness of a strategic reserve in the presence of a high portfolio share of renewable energy sources

Pradyumna C. Bhagwat; Jörn C. Richstein; Emile J L Chappin; Laurens J. de Vries

doi:10.1016/j.jup.2016.01.006

The effectiveness of a strategic reserve in the presence of a high portfolio share of renewable energy sources

Pradyumna C. Bhagwat^*, Jörn C. Richstein, Emile J L Chappin, Laurens J. de Vries

^*Corresponding author for this work

Energy and Industry

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Abstract

To ensure sufficient investment in electricity generation capacity, mechanisms such as strategic reserves are being considered or already implemented. We analyze the effectiveness of a strategic reserve in the presence of a growing portfolio share of renewable energy sources (RES) with EMLab-Generation, an agent-based electricity market model. A strategic reserve can stabilize investment, but within limits. Uncertainty regarding future demand may cause the market to become instable, potentially leading to periods with very high electricity prices. In the presence of a large share of variable renewable energy sources, the reserve design should be adjusted or replaced by an alternative capacity mechanism.

Original language	English
Pages (from-to)	13-28
Number of pages	16
Journal	Utilities Policy: strategy, performance, regulation
Volume	39
DOIs	https://doi.org/10.1016/j.jup.2016.01.006
Publication status	Published - 2016

Keywords

Agent-based modeling
Capacity mechanisms
Strategic reserve

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jup.2016.01.006

1-s2.0-S0957178716300169Final published version, 1.96 MBLicence: CC BY

Cite this

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AU - de Vries, Laurens J.

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AB - To ensure sufficient investment in electricity generation capacity, mechanisms such as strategic reserves are being considered or already implemented. We analyze the effectiveness of a strategic reserve in the presence of a growing portfolio share of renewable energy sources (RES) with EMLab-Generation, an agent-based electricity market model. A strategic reserve can stabilize investment, but within limits. Uncertainty regarding future demand may cause the market to become instable, potentially leading to periods with very high electricity prices. In the presence of a large share of variable renewable energy sources, the reserve design should be adjusted or replaced by an alternative capacity mechanism.

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The effectiveness of a strategic reserve in the presence of a high portfolio share of renewable energy sources

Abstract

Keywords

UN SDGs

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