How do demand response and electrical energy storage affect (the need for) a capacity market?

How do demand response and electrical energy storage affect (the need for) a capacity market?

Khan, A.S.M. (TU Delft Energie and Industrie)
Verzijlbergh, R.A. (TU Delft Energie and Industrie)
Sakinci, Ozgur Can (External organisation)
De Vries, Laurens (TU Delft Energie and Industrie)

2018

To ensure security of supply and incentivize reliable investment in generation capacity, capacity markets (CMs) have been implemented or are being considered. However, demand response (DR) and electrical energy storage (EES) also contribute to system adequacy. In this paper, we analyse the change in the need for a CM if DR and EES are available, in the presence of a growing portfolio share of intermittent renewable energy sources electricity (RES-E). We present a novel hybrid electricity market model of the transition to a low-carbon electricity system which uses optimization for short-term market operations and agent-based simulation of long-term decisions. DR and EES may significantly reduce the risk of shortages in an energy-only market, even if investment decisions are myopic, like in our model, as compared to an energy-only market without flexibility options. We also present a novel mechanism for contribution of EES to the CM. This reduces the cost of the CM and improves the business case for EES. In our model, DR and EES achieve almost the same improvement of security of supply as a CM, but they do so at a lower cost. Therefore, the case for a centralized CM is weakened in a system with even a limited share of DR and medium-term EES, as presented in our model. These results depend on the duration of scarcity events and the cost of EES and DR. Refinement of the model representation will be required to extrapolate these conclusions to real markets with other types of DR, EES and CMs.

Agent-based modelling
Capacity market
Demand response
Electrical energy storage
Optimization
System adequacy

http://resolver.tudelft.nl/uuid:f1ff9398-b7e4-4a91-ac88-d08056d6588f

https://doi.org/10.1016/j.apenergy.2018.01.057

2020-07-22

0306-2619

Applied Energy, 214, 39-62

Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project https://www.openaccess.nl/en/you-share-we-take-care Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.

Institutional Repository

journal article

© 2018 A.S.M. Khan, R.A. Verzijlbergh, Ozgur Can Sakinci, Laurens De Vries