Spatial and temporal power shifting from flexible sources. An economic and environmental assessment

Abstract

The push to integrate massive Renewable Energy Sources (RES) puts the future development of power systems under significant uncertainties. This study analyses a private investment in Pumped Hydro Storage (PHS) operating in a zonal market characterized by transmission congestion between zones. This study shows negative NPV values for the investment in PHS technology in two Italian zones. The profit analysis of the private investor should be accompanied by the assessment of its impact on social welfare, represented here in terms of avoided CO2 emissions and RES system integration. PHS operation, despite being costs minimizing from a system standpoint, does not guarantee optimality in terms of social welfare improvement. On the other side, transmission upgrade investment projects are profitable and might contribute to increase the overall social gain. Policy incentives in support to one technology or another would intervene if its social value would at least cover the net loss.