Motivating the optimal procurement and deployment of electric storage as a transmission asset

We consider the optimal choice between two means of relieving congestion in an electricity network: (1) traditional expansion of transmission capacity; and (2) storage as a transmission asset (SATA). We do so in an environment where the electric utility has privileged knowledge of both the cost of i...

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Bibliographic Details
Published in:Energy policy 2020-03, Vol.138, p.1-15, Article 111202
Main Authors: Brown, David P., Sappington, David E.M.
Format: Article
Language:English
Subjects:
Assets
Compensation
Congestion
Deployment
Electric utilities
Electricity
Electricity network congestion
Energy policy
Procurement
Regulation
Storage
Storage as a transmission asset
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Summary:We consider the optimal choice between two means of relieving congestion in an electricity network: (1) traditional expansion of transmission capacity; and (2) storage as a transmission asset (SATA). We do so in an environment where the electric utility has privileged knowledge of both the cost of implementing SATA and the likelihood of local network congestion. The optimal policy differs considerably from policies under active consideration, in part by paying the utility relatively little for implementing SATA. Despite the relatively limited compensation, the utility secures rent from its privileged knowledge, particularly its knowledge of SATA implementation costs. •Storage as a transmission asset (SATA) can replace transmission capacity expansion.•The optimal procurement of SATA involves modest fixed payments to limit utility rent.•The modest payment induces under-deployment of SATA.•Revenue sharing can help to limit under-deployment.•The optimal procurement policy differs markedly from popular policies.
ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2019.111202