Estimating the adequacy revenue considering long-term reliability in a renewable power system

• Published in: Energy (Oxford) Vol. 243; p. 123022
• Main Authors: Machado, Renato Haddad Simões, Rego, Erik Eduardo, Udaeta, Miguel Edgar Morales, Nascimento, Viviane Tavares
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 15-03-2022; Elsevier BV
• Subjects: Adequacy; Adequacy mechanism; Electric power systems; Electricity market; Energy storage; Hydroelectric power; Income; Investments; Missing money; Production costs; Reliability; Renewable energy; Revenue; Security; Variable renewable sources; Variable renewable sources; Missing money; Adequacy mechanism; Electricity market
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2021.123022

The growing participation of variable renewable sources, with production costs close to zero, requires the review of electricity markets to guarantee security of supply. This work evaluates the dependence on additional revenue of different technologies that provide long-term reliability in a predominantly hydropower system, with model-based spot price, that considers generators variable production cost, and price cap. Using the future configuration of Brazilian Ten-Years Plan, each technology's revenue is estimated and then compared with investments required. Results demonstrate that, in systems with this market design, only technologies with a high dispatch factor can cover the investments solely with revenues from selling their production. For wind and solar plants, in 35% of scenarios, this income is sufficient to cover the investments. On the other hand, thermopower has more than 90% of scenarios where net income is nil, indicating that adequacy remuneration should cover investments. Battery storage and demand response are also analyzed. As the final income for a project will be given by the sum of different revenues, technologies that don't depend on a certain product may exercise market power and render ones that depend on that revenue infeasible, even if this solution isn't the most efficient for the system.
•Energy price is insufficient to remunerate sources in markets with price cap.•Only high dispatch factor sources are viable just with electricity remuneration.•Stable prices due to hydropower characteristics reduces storages competitiveness.•Thermopower and demand response depend on adequacy revenue in renewable systems.