An insurance mechanism for electricity reliability differentiation under deep decarbonization
Securing an adequate supply of dispatchable resources is critical for keeping a power system reliable under high penetrations of variable generation. Strategic reserves have been used by a range of jurisdictions to procure investment in additional generation reserves given the missing money problem...
| Váldodahkkit: | , , , , |
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| Materiálatiipa: | Journal article |
| Giella: | English |
| Almmustuhtton: |
Elsevier
2022
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| _version_ | 1826308604664217600 |
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| author | Billimoria, F Fele, F Savelli, I Morstyn, T McCulloch, M |
| author_facet | Billimoria, F Fele, F Savelli, I Morstyn, T McCulloch, M |
| author_sort | Billimoria, F |
| collection | OXFORD |
| description | Securing an adequate supply of dispatchable resources is critical for keeping a power system reliable under high penetrations of variable generation. Strategic reserves have been used by a range of jurisdictions to procure investment in additional generation reserves given the missing money problem in energy only market designs. Given the growing flexibility and heterogeneity of load enabled by advancements in distributed resource and control technology, strategic reserve procurement needs to be able to reflect the different preferences of energy consumers. To address this challenge this paper develops an insurance risk mechanism for the procurement of strategic reserves that is adapted to a future with variable generation and flexible demand. The proposed design introduces a central insurance scheme with prudential requirements that align diverse consumer reliability preferences with the financial objectives of an insurer-of-last-resort. We illustrate the benefits of the scheme in (i) differentiating load by usage to enable better management of the system during times of extreme scarcity, (ii) incentivizing incremental investment in generation infrastructure that is aligned with consumer reliability preferences and (iii) improving overall reliability outcomes for consumers. |
| first_indexed | 2024-03-07T07:21:50Z |
| format | Journal article |
| id | oxford-uuid:c779d0fd-d09a-4408-b4df-ad70271b9fc7 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T07:21:50Z |
| publishDate | 2022 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:c779d0fd-d09a-4408-b4df-ad70271b9fc72022-10-14T16:29:25ZAn insurance mechanism for electricity reliability differentiation under deep decarbonizationJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:c779d0fd-d09a-4408-b4df-ad70271b9fc7EnglishSymplectic ElementsElsevier2022Billimoria, FFele, FSavelli, IMorstyn, TMcCulloch, MSecuring an adequate supply of dispatchable resources is critical for keeping a power system reliable under high penetrations of variable generation. Strategic reserves have been used by a range of jurisdictions to procure investment in additional generation reserves given the missing money problem in energy only market designs. Given the growing flexibility and heterogeneity of load enabled by advancements in distributed resource and control technology, strategic reserve procurement needs to be able to reflect the different preferences of energy consumers. To address this challenge this paper develops an insurance risk mechanism for the procurement of strategic reserves that is adapted to a future with variable generation and flexible demand. The proposed design introduces a central insurance scheme with prudential requirements that align diverse consumer reliability preferences with the financial objectives of an insurer-of-last-resort. We illustrate the benefits of the scheme in (i) differentiating load by usage to enable better management of the system during times of extreme scarcity, (ii) incentivizing incremental investment in generation infrastructure that is aligned with consumer reliability preferences and (iii) improving overall reliability outcomes for consumers. |
| spellingShingle | Billimoria, F Fele, F Savelli, I Morstyn, T McCulloch, M An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title | An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title_full | An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title_fullStr | An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title_full_unstemmed | An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title_short | An insurance mechanism for electricity reliability differentiation under deep decarbonization |
| title_sort | insurance mechanism for electricity reliability differentiation under deep decarbonization |
| work_keys_str_mv | AT billimoriaf aninsurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT felef aninsurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT savellii aninsurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT morstynt aninsurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT mccullochm aninsurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT billimoriaf insurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT felef insurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT savellii insurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT morstynt insurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization AT mccullochm insurancemechanismforelectricityreliabilitydifferentiationunderdeepdecarbonization |