Logo
ScienceStack
Table of Contents
Fetching ...
Sign In

Missing Money and Market-Based Adequacy in Deeply Decarbonized Power Systems with Long-Duration Energy Storage

Adam Suski, Elina Spyrou, Richard Green

TL;DR

The paper tackles the missing money problem in deeply decarbonized power systems where long-duration energy storage (LDES) becomes central to adequacy. It develops a two-stage stochastic equilibrium framework that endogenouslyizes continuous, duration-based capacity accreditation for storage and applies it to a Great Britain-like case under varying emission limits. The results show that well-calibrated capacity markets can deliver near-efficient investment signals and reduce revenue volatility in moderate decarbonization, but their effectiveness declines as decarbonization deepens due to price-cap distortions and shifting adequacy contributions of LDES. The study highlights regulatory challenges and argues for transparent, duration-aware accreditation, while also suggesting complementary risk-hedging mechanisms and future work on network constraints and fundamental conditions for marginal EFC-based accreditation.

Abstract

The ability of deeply decarbonised power systems to ensure adequacy may increasingly depend on long-duration energy storage (LDES). A central challenge is whether capacity markets (CMs), originally designed around thermal generation, can provide efficient investment signals when storage becomes a central participant. While recent studies have advanced methods for accrediting variable renewables and short-duration storage, the effectiveness of these methods in CMs with substantial LDES penetration remains largely unexplored. To address this gap, we extend a two-stage stochastic equilibrium investment model by endogenising continuous, duration-based capacity accreditation for storage and apply it to a Great Britain-based case using 40 years of weather-driven demand and renewable profiles under varying emission limits. Results show that well-calibrated CMs can sustain near-efficient investment and mitigate revenue volatility, but their effectiveness diminishes in deeply decarbonized systems, underscoring both their potential and the regulatory challenges of supporting large-scale LDES.

Missing Money and Market-Based Adequacy in Deeply Decarbonized Power Systems with Long-Duration Energy Storage

TL;DR

The paper tackles the missing money problem in deeply decarbonized power systems where long-duration energy storage (LDES) becomes central to adequacy. It develops a two-stage stochastic equilibrium framework that endogenouslyizes continuous, duration-based capacity accreditation for storage and applies it to a Great Britain-like case under varying emission limits. The results show that well-calibrated capacity markets can deliver near-efficient investment signals and reduce revenue volatility in moderate decarbonization, but their effectiveness declines as decarbonization deepens due to price-cap distortions and shifting adequacy contributions of LDES. The study highlights regulatory challenges and argues for transparent, duration-aware accreditation, while also suggesting complementary risk-hedging mechanisms and future work on network constraints and fundamental conditions for marginal EFC-based accreditation.

Abstract

The ability of deeply decarbonised power systems to ensure adequacy may increasingly depend on long-duration energy storage (LDES). A central challenge is whether capacity markets (CMs), originally designed around thermal generation, can provide efficient investment signals when storage becomes a central participant. While recent studies have advanced methods for accrediting variable renewables and short-duration storage, the effectiveness of these methods in CMs with substantial LDES penetration remains largely unexplored. To address this gap, we extend a two-stage stochastic equilibrium investment model by endogenising continuous, duration-based capacity accreditation for storage and apply it to a Great Britain-based case using 40 years of weather-driven demand and renewable profiles under varying emission limits. Results show that well-calibrated CMs can sustain near-efficient investment and mitigate revenue volatility, but their effectiveness diminishes in deeply decarbonized systems, underscoring both their potential and the regulatory challenges of supporting large-scale LDES.

Paper Structure

This paper contains 20 sections, 15 equations, 7 figures, 5 tables, 1 algorithm.

Table of Contents

  1. Introduction
  2. Methodology
  3. Equilibrium capacity expansion model
  4. Generators
  5. Storage
  6. Consumers
  7. Market clearing conditions
  8. Solution strategy
  9. Capacity accreditation
  10. Capacity market parameters
  11. Experiment design
  12. Performance metrics
  13. Case study setup
  14. Results
  15. The missing money assessment
  16. ...and 5 more sections

Figures (7)

  • Figure 1: Capacity results for the EOM VOLL simulations. Panel a shows the installed power capacity as a percentage of peak demand, while panel b shows the installed duration of LDES. In the 15 gCO2/kWh case, no battery capacity is part of the welfare maximising mix, which is why the battery bar does not appear in this cluster and does not appear in subsequent results figures.
  • Figure 2: Cost recovery per technology for EOM VOLL and EOM PC opt. mix.
  • Figure 3: Marginal capacity credit estimates as a function of storage duration. Markers indicate credit for duration obtained from EOM VOLL simulations.
  • Figure 4: CCGT-CCS marginal 0.01MW unit contribution to EUE reduction under alternative setups.
  • Figure 5: Credited net-CONEs and capacity credits for technologies identified by EOM VOLL simulations. Note for storage, the optimal duration is considered.
  • ...and 2 more figures