How much is enough? Optimal support payments in a renewable-rich power system

Tuomas Rintamäki, Afzal S. Siddiqui*, Ahti Salo

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

9 Citations (Scopus)

Abstract

The large-scale deployment of intermittent renewable energy sources may cause substantial power imbalance. Together with the transmission grid congestion caused by the remoteness of these sources from load centers, this creates a need for fast-adjusting conventional capacity such as gas-fired plants. However, these plants have become unprofitable because of lower power prices due to the zero marginal costs of renewables. Consequently, policymakers are proposing new measures for mitigating balancing costs and securing supply. In this paper, we take the perspective of the regulator to assess the effectiveness of support payments to flexible generators. Using data on the German power system, we implement a bi-level programming model, which shows that such payments for gas-fired plants in southern Germany reduce balancing costs and can be used as part of policy to integrate renewable energy.

Original languageEnglish
Pages (from-to)300-313
Number of pages14
JournalEnergy
Volume117
DOIs
Publication statusPublished - 15 Dec 2016
MoE publication typeA1 Journal article-refereed

Keywords

  • Balancing market
  • Congestion management
  • Day-ahead market
  • Mathematical programming with equilibrium constraints
  • Renewable energy
  • Support payments

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