Capacity tariff mechanism of a pumped hydro storage station: Pricing approaches for reducing benefit allocation unfairness of integrated renewable energy systems

Abstract

Motivating pumped hydro storage stations (PHSs) to provide capacity support can effectively improve renewable energy utilisation in integrated renewable energy systems (IRESs). Historically, the contribution evaluation of the PHS near the load side has been the focus, whereas the PHS near the power side has not yet been evaluated. The lack of functional positioning and tariff signals of PHS near the power side leads to a dilemma of low investor enthusiasm, which hinders the rapid development of IRESs. Therefore, this study proposed a capacity configuration framework of IRES coordinated with the capacity tariff of PHS by evaluating the functional positioning, capacity, and economic contribution of PHS. Four pricing approaches for reducing benefit allocation unfairness are proposed and compared using a practical engineering case in Qinghai Province, China. The function positioning results show that the comprehensive contribution of the PHS is determined by the capacity tariff mechanism, which is affected by its own capacity, benefit allocation method, and the combination mode of the stations. This mechanism reveals that the economic contribution of the PHS to the IRES first increased and then decreased as the PHS capacity contribution increased. Based on the contribution of PHS, the weight–Shapley value method effectively balances the relationship between the contribution and benefit allocation for each station and identifies reasonable investment opportunities for all types of power enterprises. Therefore, this study shows the value of using a capacity configuration framework to policymakers and investors for identifying the beneficiaries of IRES and pricing the capacity tariff of a PHS to improve its regulation enthusiasm.