A Probabilistic and Value-Based Planning Approach to Assess the Competitiveness between Gas-Fired and Renewables in Hydro-Dominated Systems: A Brazilian Case Study

Felipe Nazaré,Luiz Barroso,Bernardo Bezerra

doi:10.3390/en14217281

Abstract

The main challenge with the penetration of variable renewable energy (VRE) in thermal-dominated systems has been the increase in the need for operating reserves, relying on dispatchable and flexible resources. In the case of hydro-dominated systems, the cost-effective flexibility provided by hydro-plants facilitates the penetration of VRE, but the compounded production variability of these resources challenges the integration of baseload gas-fired plants. The Brazilian power system illustrates this situation, in which the development of large associated gas fields economically depends on the operation of gas-fired plants. Given the current competitiveness of VRE, a natural question is the economic value and tradeoffs for expanding the system opting between baseload gas-fired generation and VRE in an already flexible hydropower system. This paper presents a methodology based on a multi-stage and stochastic capacity expansion model to estimate the optimal mix of baseload thermal power plants and VRE additions considering their contributions for security of supply, which includes peak, energy, and operating reserves, which are endogenously defined in a time-varying and sized in a dynamic way as well as adequacy constraints. The presented model calculates the optimal decision plan, allowing for the estimation of the economical tradeoffs between baseload gas and VRE supply considering their value for the required services to the system. This allows for a comparison between the integration costs of these technologies on the same basis, thus helping policymakers and system planners to better decide on the best way to integrate the gas resources in an electricity industry increasingly renewable. A case study based on a real industrial application is presented for the Brazilian power system.

Highlights

The integration between electricity and gas started in the 90s as a consequence of a widespread construction of new gas-fired power plants, both combined-cycle and opencycle
The baseload dispatch of efficient gas plants solved the commercial feasibility of the development of oil-gas fields, whose gas supply agreements demand take-or-pay clauses to secure a stable revenue stream to enable the financing of the new gas infrastructure
Energies 2021, 14, 7281 services in the system. This allows for a comparison between the integration costs of these technologies on the same basis, helping policymakers to better decide on the best way to integrate the gas resources in an electricity industry increasingly renewable

Summary

Introduction

The integration between electricity and gas started in the 90s as a consequence of a widespread construction of new gas-fired power plants, both combined-cycle and opencycle. Modular, and efficient, the technology was able to displace existing generation in many countries, mostly those already dominated by inefficient and more pollutant thermal generation. This had a perfect fit for investors with the creation of wholesale energy markets launched in the 1990s: as baseload resources they could secure a volume in the energy spot markets and capture a revenue stream from spot-prices. The combination of a large consumption market for power and non-power uses (industry, heating, etc.) engendered a massive integration of gas in the electricity industry in many developed countries and, most importantly, the baseload dispatch of thermal plants secured stable revenue streams for both electricity and gas investors. The development of Liquefied Natural Gas (LNG) has introduced flexibility and removed many physical barriers for the integration of these two markets [1]

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