Document Type:Technical Results
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This presentation describes the results of a series of straightforward, numerical modeling experiments that were conducted to illustrate the phenomenon of decreasing returns to scale for intermittent renewable energy and to estimate its economic potential in the United States.
For wind and solar, both temporal and spatial variation are correlated to a certain extent with electricity demand—sometimes positively, but more often negatively. Storing electricity is expensive, and transmitting it also has a cost and is often constrained, so that its value varies across time and space. Therefore, both dimensions of variability of renewable energy have important economic implications. The key economic effect of spatial and, especially, temporal variation is to impose decreasing returns to scale; that is, the value of the marginal unit of intermittent renewable capacity decreases with increasing penetration. The shape of this marginal value curve is system-specific and is driven by essentially three factors: 1) the time profile of its output is inconvenient, 2) its locational profile is inconvenient, and 3) there are physical constraints on the resource base.
The results of this analysis suggest that the most significant force driving decreasing returns to scale for intermittent renewable energy is temporal variation. For numerical modeling designed to inform investment decisions in the electric sector under alternative policies, a realistic representation of the value of renewable energy is essential.
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