Economic and technical challenges of flexible operations under large-scale variable renewable deployment

Fundamental characteristics of solar and wind power have generated controversy about their economic competitiveness and appropriate techniques for assessing their value. This research presents an approach to quantify the economic value of variable renewable capacity and demonstrates its dependence on renewable deployment levels, regional resource endowments, fleet flexibility, and trade assumptions. It assesses economic and technical impacts of large-scale renewable penetration by linking two models, representing electric-sector investments and detailed operations. Model results for California and Texas suggest that operational constraints and costs of dispatchable generators (e.g., minimum load levels, ramping limits, startup costs) can impact renewable integration costs, but the temporal and spatial variability of solar and wind are larger determinants of their value. Restrictions on transmission and regional coordination in capacity planning and dispatch decrease the economic value of variable renewable energy, highlighting the potential roles of market design and trade. Energy storage is shown to be a valuable balancing asset at higher solar and wind penetration levels, but potential revenues diminish with increased storage deployment. •The market value of solar and wind drops at higher deployment due to variability.•Value deflation varies by scenario, region, and unit-level operational constraints.•Inter-regional trade can mitigate but not solve renewable integration challenges.•Storage can help renewable profitability but also experiences diminishing returns.•Model results focus on California and Texas under large-scale renewable deployment.