Renewable electricity grids, battery storage and missing money

In this study, we investigate the feasibility of using a hybrid renewable energy system with battery storage to power an electricity grid without extra investment in fast-responding, peak-load generation assets. When more renewable energy (RE) sources are integrated into a grid, declining wholesale market prices reduce the incentive to build new thermal capacity - leading to the 'missing money' problem; intermittent RE requires more fast-responding (peak-load) generation to maintain system stability. Some regions use capacity payments to incentivize investment in new peak-load capacity. For a fossil-fuel dominated system, we find that battery storage might replace peak gas as a fast-responding generating asset. Specifically, we determine whether Alberta can eliminate coal-fired power and further reduce reliance on natural gas using a hybrid RE system that includes battery storage. We employ 10 years of provincial wind, solar and load data and a mathematical programming model to simulate the choice of optimal generation mixes under various carbon tax scenarios. We find that high carbon taxes incentivize greater wind integration and battery storage, but that solar photovoltaic (PV) remains uneconomical. Coal and gas-fired baseload capacities can be partially substituted by the renewables, but, in the absence of battery storage, fast-responding, open-cycle gas capacity is required to maintain system reliability. A battery can potentially replace some fast-responding gas capacity, thereby mitigating the 'missing money' problem, but this is not always the case. Overall, CO2 emissions can be reduced by some 20 percent but at a cost of $200/tCO(2) or more.