Arbeitspapier
On the role of electricity storage in capacity remuneration mechanisms
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. However, determining the amount of firm capacity an electricity storage unit can provide remains a challenging task.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Paper Series in Production and Energy ; No. 37
- Classification
-
Wirtschaft
- Subject
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Elektrizitätswirtschaft
Energieinfrastruktur
Lager
Kapazitätsplanung
Mechanismus-Design-Theorie
Optionsgeschäft
Agentenbasierte Modellierung
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Fraunholz, Christoph
Keles, Dogan
Fichtner, Wolf
- Event
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Veröffentlichung
- (who)
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Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP)
- (where)
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Karlsruhe
- (when)
-
2019
- DOI
-
doi:10.5445/IR/1000104471
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Fraunholz, Christoph
- Keles, Dogan
- Fichtner, Wolf
- Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP)
Time of origin
- 2019
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Capacity remuneration mechanisms for electricity markets in transition
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Cross-border effects of capacity remuneration mechanisms: The Swiss case
The Energy Transition and the Value of Capacity Remuneration Mechanisms
Cross-border effects of capacity mechanisms in electricity markets
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Quantitative assessments of capacity mechanisms in electricity markets with rising renewable feed-in
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