Facilitating the Development and Integration of Low-Carbon Energy Technologies

Climate change mitigation will require extensive decarbonization of the electricity sector. This thesis addresses both large-scale wind integration (Papers 1–3) and development of new energy technologies (Paper 4) in service of this goal. Compressed air energy storage (CAES) could be paired with a wind farm to provide firm, dispatchable baseload power, or serve as a peaking plant and capture upswings in electricity prices. Paper 1 presents a firm-level engineering-economic analysis of a wind/CAES system with a wind farm in central Texas, load in either Dallas or Houston, and a CAES plant whose location is profit-optimized. Of a range of market scenarios considered, the CAES plant is found to be profitable only given the existence of large and infrequent price spikes. Social benefits of wind/CAES include avoided construction of new generation capacity, improved air quality during peak demand, and increased economic surplus, but may not outweigh the private cost of the CAES system nor justify a subsidy. Like CAES, pumped hydropower storage (PHS) ramps quickly enough to smooth wind power and could profit from arbitrage on short-term price fluctuations exacerbated by large-scale wind. Germany has aggressive plans for wind power expansion, and Paper 2 analyzes an investment opportunity in a PHS facility in Norway that practices arbitrage in the German spot market. Price forecasts given increased wind capacity are used to calculate profit-maximizing production schedules and annual revenue streams. Real options theory is used to value the investment opportunity, since unlike net present value, it accounts for uncertainty and intertemporal choice. Results show that the optimal investment strategy under the base scenario is to wait approximately eight years then