IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v138y2020ics0301421520300045.html
   My bibliography  Save this article

The price is right? How pricing and incentive mechanisms in California incentivize building distributed hybrid solar and energy-storage systems

Author

Listed:
  • Varghese, Sushant
  • Sioshansi, Ramteen

Abstract

Distributed energy resources, including photovoltaic solar and energy storage, are seeing increased deployment. The optimal configuration and operation of these resources depend on several external factors, including energy pricing, incentive programs, and the provision of capacity payments. We model, as a mixed-integer optimization problem, the design and operation of a hybrid energy system that consists of photovoltaic solar arrays that are coupled with energy storage using a shared inverter. We apply our optimization model to a case study that considers two locations in California and a variety of pricing and subsidy regimes. We demonstrate that a well designed time-variant retail tariff provides reasonable incentives for building and operating a hybrid energy system. On the other hand, investment tax credits and the provision of capacity payments can be considerably more distortionary. In particular, constraints that govern the investment tax credit in the United States can hamper significantly the deployment of the hybrid energy systems that we examine.

Suggested Citation

  • Varghese, Sushant & Sioshansi, Ramteen, 2020. "The price is right? How pricing and incentive mechanisms in California incentivize building distributed hybrid solar and energy-storage systems," Energy Policy, Elsevier, vol. 138(C).
    • Handle: RePEc:eee:enepol:v:138:y:2020:i:c:s0301421520300045
    DOI: 10.1016/j.enpol.2020.111242
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421520300045
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2020.111242?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. O. Schmidt & A. Hawkes & A. Gambhir & I. Staffell, 2017. "The future cost of electrical energy storage based on experience rates," Nature Energy, Nature, vol. 2(8), pages 1-8, August.
    2. Aneke, Mathew & Wang, Meihong, 2016. "Energy storage technologies and real life applications – A state of the art review," Applied Energy, Elsevier, vol. 179(C), pages 350-377.
    3. Hoppmann, Joern & Volland, Jonas & Schmidt, Tobias S. & Hoffmann, Volker H., 2014. "The economic viability of battery storage for residential solar photovoltaic systems – A review and a simulation model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 1101-1118.
    4. Brounen, Dirk & Kok, Nils & Quigley, John M., 2012. "Residential energy use and conservation: Economics and demographics," European Economic Review, Elsevier, vol. 56(5), pages 931-945.
    5. Filippini, Massimo & Pachauri, Shonali, 2004. "Elasticities of electricity demand in urban Indian households," Energy Policy, Elsevier, vol. 32(3), pages 429-436, February.
    6. Maryam Arbabzadeh & Ramteen Sioshansi & Jeremiah X. Johnson & Gregory A. Keoleian, 2019. "The role of energy storage in deep decarbonization of electricity production," Nature Communications, Nature, vol. 10(1), pages 1-11, December.
    7. Zakeri, Behnam & Syri, Sanna, 2015. "Electrical energy storage systems: A comparative life cycle cost analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 569-596.
    8. Denholm, Paul & Sioshansi, Ramteen, 2009. "The value of compressed air energy storage with wind in transmission-constrained electric power systems," Energy Policy, Elsevier, vol. 37(8), pages 3149-3158, August.
    9. Gallo, A.B. & Simões-Moreira, J.R. & Costa, H.K.M. & Santos, M.M. & Moutinho dos Santos, E., 2016. "Energy storage in the energy transition context: A technology review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 800-822.
    10. Ramteen Sioshansi & Antonio J. Conejo, 2017. "Optimization in Engineering," Springer Optimization and Its Applications, Springer, number 978-3-319-56769-3, June.
    11. Sengupta, Manajit & Xie, Yu & Lopez, Anthony & Habte, Aron & Maclaurin, Galen & Shelby, James, 2018. "The National Solar Radiation Data Base (NSRDB)," Renewable and Sustainable Energy Reviews, Elsevier, vol. 89(C), pages 51-60.
    12. Xiaomin Xi & Ramteen Sioshansi, 2016. "A dynamic programming model of energy storage and transformer deployments to relieve distribution constraints," Computational Management Science, Springer, vol. 13(1), pages 119-146, January.
    13. Besagni, Giorgio & Borgarello, Marco, 2018. "The determinants of residential energy expenditure in Italy," Energy, Elsevier, vol. 165(PA), pages 369-386.
    14. Kyriakopoulos, Grigorios L. & Arabatzis, Garyfallos, 2016. "Electrical energy storage systems in electricity generation: Energy policies, innovative technologies, and regulatory regimes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 56(C), pages 1044-1067.
    15. Muratori, Matteo & Roberts, Matthew C. & Sioshansi, Ramteen & Marano, Vincenzo & Rizzoni, Giorgio, 2013. "A highly resolved modeling technique to simulate residential power demand," Applied Energy, Elsevier, vol. 107(C), pages 465-473.
    16. Longhi, Simonetta, 2015. "Residential energy expenditures and the relevance of changes in household circumstances," Energy Economics, Elsevier, vol. 49(C), pages 440-450.
    17. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.
    18. Mariaud, Arthur & Acha, Salvador & Ekins-Daukes, Ned & Shah, Nilay & Markides, Christos N., 2017. "Integrated optimisation of photovoltaic and battery storage systems for UK commercial buildings," Applied Energy, Elsevier, vol. 199(C), pages 466-478.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Juárez-Luna, David & Urdiales, Eduardo, 2021. "Participación de la capacidad fotovoltaica instalada en México: un análisis benchmarking [Share of installed photovoltaic capacity in Mexico: a benchmarking analysis]," MPRA Paper 114589, University Library of Munich, Germany.
    2. Schöniger, Franziska & Morawetz, Ulrich B., 2022. "What comes down must go up: Why fluctuating renewable energy does not necessarily increase electricity spot price variance in Europe," Energy Economics, Elsevier, vol. 111(C).
    3. Zakeri, Behnam & Gissey, Giorgio Castagneto & Dodds, Paul E. & Subkhankulova, Dina, 2021. "Centralized vs. distributed energy storage – Benefits for residential users," Energy, Elsevier, vol. 236(C).
    4. Castagneto Gissey, Giorgio & Zakeri, Behnam & Dodds, Paul E. & Subkhankulova, Dina, 2021. "Evaluating consumer investments in distributed energy technologies," Energy Policy, Elsevier, vol. 149(C).
    5. Zakeri, Behnam & Cross, Samuel & Dodds, Paul.E. & Gissey, Giorgio Castagneto, 2021. "Policy options for enhancing economic profitability of residential solar photovoltaic with battery energy storage," Applied Energy, Elsevier, vol. 290(C).
    6. Fanyue Qian & Weijun Gao & Dan Yu & Yongwen Yang & Yingjun Ruan, 2022. "An Analysis of the Potential of Hydrogen Energy Technology on Demand Side Based on a Carbon Tax: A Case Study in Japan," Energies, MDPI, vol. 16(1), pages 1-23, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rouindej, Kamyar & Samadani, Ehsan & Fraser, Roydon A., 2020. "A comprehensive data-driven study of electrical power grid and its implications for the design, performance, and operational requirements of adiabatic compressed air energy storage systems," Applied Energy, Elsevier, vol. 257(C).
    2. Taneja, Shivani & Mandys, Filip, 2022. "Drivers of UK household energy expenditure: Promoting efficiency and curbing emissions," Energy Policy, Elsevier, vol. 167(C).
    3. Koirala, Binod Prasad & van Oost, Ellen & van der Windt, Henny, 2018. "Community energy storage: A responsible innovation towards a sustainable energy system?," Applied Energy, Elsevier, vol. 231(C), pages 570-585.
    4. Colmenar-Santos, Antonio & Molina-Ibáñez, Enrique-Luis & Rosales-Asensio, Enrique & Blanes-Peiró, Jorge-Juan, 2018. "Legislative and economic aspects for the inclusion of energy reserve by a superconducting magnetic energy storage: Application to the case of the Spanish electrical system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 2455-2470.
    5. Diana Enescu & Gianfranco Chicco & Radu Porumb & George Seritan, 2020. "Thermal Energy Storage for Grid Applications: Current Status and Emerging Trends," Energies, MDPI, vol. 13(2), pages 1-21, January.
    6. Zhou, Yuekuan & Zheng, Siqian, 2020. "Machine-learning based hybrid demand-side controller for high-rise office buildings with high energy flexibilities," Applied Energy, Elsevier, vol. 262(C).
    7. Röck, Martin & Saade, Marcella Ruschi Mendes & Balouktsi, Maria & Rasmussen, Freja Nygaard & Birgisdottir, Harpa & Frischknecht, Rolf & Habert, Guillaume & Lützkendorf, Thomas & Passer, Alexander, 2020. "Embodied GHG emissions of buildings – The hidden challenge for effective climate change mitigation," Applied Energy, Elsevier, vol. 258(C).
    8. Masebinu, S.O. & Akinlabi, E.T. & Muzenda, E. & Aboyade, A.O., 2017. "Techno-economics and environmental analysis of energy storage for a student residence under a South African time-of-use tariff rate," Energy, Elsevier, vol. 135(C), pages 413-429.
    9. Dumont, O. & Lemort, V., 2020. "Mapping of performance of pumped thermal energy storage (Carnot battery) using waste heat recovery," Energy, Elsevier, vol. 211(C).
    10. Javier Bueno & Desiderio Romero-Jordán & Pablo del Río, 2020. "Analysing the Drivers of Electricity Demand in Spain after the Economic Crisis," Energies, MDPI, vol. 13(20), pages 1-18, October.
    11. Grdenić, Goran & Delimar, Marko & Robić, Slavica, 2020. "Framing the context of energy poverty in Croatia: A case-study from Zagreb," Energy Policy, Elsevier, vol. 147(C).
    12. Salari, Mahmoud & Javid, Roxana J., 2016. "Residential energy demand in the United States: Analysis using static and dynamic approaches," Energy Policy, Elsevier, vol. 98(C), pages 637-649.
    13. Olsen, Karen Pardos & Zong, Yi & You, Shi & Bindner, Henrik & Koivisto, Matti & Gea-Bermúdez, Juan, 2020. "Multi-timescale data-driven method identifying flexibility requirements for scenarios with high penetration of renewables," Applied Energy, Elsevier, vol. 264(C).
    14. Zhang, Ziyu & Ding, Tao & Zhou, Quan & Sun, Yuge & Qu, Ming & Zeng, Ziyu & Ju, Yuntao & Li, Li & Wang, Kang & Chi, Fangde, 2021. "A review of technologies and applications on versatile energy storage systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 148(C).
    15. Papadopoulos, Agis M., 2020. "Renewable energies and storage in small insular systems: Potential, perspectives and a case study," Renewable Energy, Elsevier, vol. 149(C), pages 103-114.
    16. Lechón, Yolanda & Lago, Carmen & Herrera, Israel & Gamarra, Ana Rosa & Pérula, Alberto, 2023. "Carbon benefits of different energy storage alternative end uses. Application to the Spanish case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 171(C).
    17. Martin, Nigel & Rice, John, 2021. "Power outages, climate events and renewable energy: Reviewing energy storage policy and regulatory options for Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 137(C).
    18. Ding, Jie & Xu, Yujie & Chen, Haisheng & Sun, Wenwen & Hu, Shan & Sun, Shuang, 2019. "Value and economic estimation model for grid-scale energy storage in monopoly power markets," Applied Energy, Elsevier, vol. 240(C), pages 986-1002.
    19. Zhixian Wang & Ying Wang & Qia Ding & Chen Wang & Kaifeng Zhang, 2020. "Energy Storage Economic Analysis of Multi-Application Scenarios in an Electricity Market: A Case Study of China," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    20. Saboori, Hedayat & Hemmati, Reza & Ghiasi, Seyyed Mohammad Sadegh & Dehghan, Shahab, 2017. "Energy storage planning in electric power distribution networks – A state-of-the-art review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 1108-1121.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:138:y:2020:i:c:s0301421520300045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.