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Optimising VRE capacity in Renewable Energy Zones

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  • Simshauser, Paul
  • Billimoria, Farhad
  • Rogers, Craig

Abstract

Australia experienced significant growth in variable renewable energy (VRE) investment commitments during 2016–2021. A subset of projects experienced material entry frictions which stemmed from inadequate network hosting capacity. In this article we examine the development of Renewable Energy Zones (REZ) as a means by which to help guide forward market commitments and produce greater coordination between generation and transmission plant investments. Using an optimisation model comprising 1500 MW of transmission network infrastructure, we explore various definitions of a ‘fully subscribed REZ’ given portfolio benefits associated with complementary wind and solar resources in Southern Queensland. When minimising cost forms the objective function, full subscription is achieved by developing 2050 MW of VRE, comprising 1700 MW of wind and 350 MW of solar. When maximising output forms the objective function, ~3400 MW of wind and solar is developed in roughly equal proportions, accepting some curtailment is an economic result. And if maximising net cashflows forms the objective, VRE development is complicated by the dynamic nature of spot prices. Specifically, in the early stages of a REZ solar is preferred but as its market share rises and value of output falls, wind investments dominate holding technology costs constant.

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  • Simshauser, Paul & Billimoria, Farhad & Rogers, Craig, 2022. "Optimising VRE capacity in Renewable Energy Zones," Energy Economics, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:eneeco:v:113:y:2022:i:c:s0140988322003838
    DOI: 10.1016/j.eneco.2022.106239
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    Cited by:

    1. McDonald, Paul, 2024. "Interrelationships of renewable energy zones in Queensland: localised effects on capacity value and congestion," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 818-833.
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    3. H. Qi & C. K. Woo & K. H. Cao & J. Zarnikau & R. Li, 2024. "Price responsiveness of solar and wind capacity demands," Post-Print hal-04597188, HAL.
    4. Gohdes, Nicholas & Simshauser, Paul & Wilson, Clevo, 2023. "Renewable investments, hybridised markets and the energy crisis: Optimising the CfD-merchant revenue mix," Energy Economics, Elsevier, vol. 125(C).
    5. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    6. Clapin, Lachlan & Longden, Thomas, 2024. "Waiting to generate: An analysis of onshore wind and solar PV project development lead-times in Australia," Energy Economics, Elsevier, vol. 131(C).
    7. McDonald, Paul, 2023. "Locational and market value of Renewable Energy Zones in Queensland," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 198-213.
    8. Gohdes, Nicholas, 2023. "Unhedged risk in hybrid energy markets: Optimising the revenue mix of Australian solar," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1363-1380.

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    More about this item

    Keywords

    Renewable Energy Zones; Renewable generation; Transmission investment;
    All these keywords.

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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