Renewables and Storage Opportunities and Valuation

Presentation Description: There are new opportunities to realize and unlock the economic value of storage as power markets undergo structural change with increasing volatility in prices driven by increasing renewable penetration rates. Forecasting the volatility in hourly and real-time prices requires embracing new techniques for using demand and supply fundamentals to capture the volatility in prices consistent with structural change in the new dynamics of power markets. Understanding the new structural drivers of power prices and their implications for determining future market price dynamics are critical foundation components to value merchant storage. Combining forecast prices with optimization under imperfect foresight provides the foundational elements to substantiate the future value of merchant storage.

Key Findings:
• Volatility in day-ahead and real-time market prices continue to grow as a function of renewable penetration rates
• Super-normal returns exist in the near-term for select locations with a slow migration to conditions of “normal” returns
• The ratio of renewables to storage becomes a critical determinant in market price volatility
• The fundamental changes in power supply create new hot spots of congestion
• Markets economically limit the size of storage because of increased prices from charging