Cost-effectiveness of energy efficiency investments for high renewable electricity systems

Abstract

Although several studies have recognized the challenges brought about the high integration of Renewable Energy Sources (RES), research has yet to systematically investigate the effects of different levels of Energy Efficiency Measures (EEMs) on power systems with a high share of RES. The primary aim of this paper is to quantitatively evaluate the economic impact of different levels of energy efficiency investments in systems with a high share of RES, based on the case of Brazil. Our review analysis revealed a lack of understanding of how to calculate the Long-term Average Cost of Saved Electricity (LACoSE). Therefore, the methodological contribution of this research also lies in the proposition of a step-by-step procedure to estimate this variable. Findings of this study suggest that EEMs may result in a reduction in the expected new installed capacity between 1.9% and 10.3%, and from 0.4% to 4.3% for the total CO2 emissions (for reductions in the final electricity demand varying from 1% to 5% respectively). This comes with a decrease in the overall system costs between 1.9% and 7.7%. The results provide further support for the hypothesis that the economic impacts of energy efficiency investments and its cost-effectiveness are affected by the share of RES in the power system and these type of measures may provide holistic benefits including not only economic advantages but also environmental and social improvements. The proposed methodology largely extends beyond the case addressed as it may provide valuable lessons for other electricity systems.