@article{RuhnauHirthPraktiknjo, author = {Ruhnau, Oliver and Hirth, Lion and Praktiknjo, Aaron}, title = {Heating with Wind: Economics of heat pumps and variable renewables}, series = {Energy Economics}, volume = {92}, journal = {Energy Economics}, doi = {10.1016/j.eneco.2020.104967}, abstract = {With the growth of wind and solar energy in electricity supply, the electrification of space and water heating is becoming a promising decarbonization option. In turn, such electrification may help the power system integration of variable renewables, for two reasons: thermal storage could provide low-cost flexibility, and heat demand is seasonally correlated with wind power. However, temporal fluctuations in heat demand may also imply new challenges for the power system. This study assesses the economic characteristics of electric heat pumps and wind energy and studies their interaction on wholesale electricity markets. Using a numerical electricity market model, we estimate the economic value of wind energy and the economic cost of powering heat pumps. We find that, just as expanding wind energy depresses its €/MWhel value, adopting heat pumps increases their €/MWhel cost. This rise can be mitigated by synergistic effects with wind power, "system-friendly" heat pump technology, and thermal storage. Furthermore, heat pumps raise the wind market value, but this effect vanishes if accounting for the additional wind energy needed to serve the heat pump load. Thermal storage facilitates the system integration of wind power but competes with other flexibility options. For an efficient adoption of heat pumps and thermal storage, we argue that retail tariffs for heat pump customers should reflect their underlying economic cost.}, language = {en} } @incollection{MadlenerRuhnau, author = {Madlener, Reinhard and Ruhnau, Oliver}, title = {Variable renewables and demand flexibility: Day-ahead versus intraday valuation}, series = {Variable Generation, Flexible Demand}, booktitle = {Variable Generation, Flexible Demand}, editor = {Sioshansi, Fereidoon}, publisher = {Academic Press}, isbn = {9780128238103}, doi = {10.1016/B978-0-12-823810-3.00005-4}, publisher = {Hertie School}, pages = {309 -- 327}, abstract = {This chapter discusses trading in the day-ahead and intraday electricity markets, first in general and then from the perspectives of renewable power generators and demand response, respectively. This includes an overview of the relevant literature, a theoretical framework, and illustrative quantitative examples. The uncertainty of renewable electricity supply drives price volatility, especially in the intraday market, and leads to balancing cost for renewables, which can be optimized through forecasting and trading. The increased intraday price volatility can be exploited and moderated by demand response, which thereby helps to balance the uncertainty of renewables.}, language = {en} } @techreport{Ruhnau, type = {Working Paper}, author = {Ruhnau, Oliver}, title = {Market-based renewables: How flexible hydrogen electrolyzers stabilize wind and solar market values}, pages = {14}, abstract = {Wind and solar energy are often expected to fall victim to their own success: the higher their share in electricity production, the more their revenue on electricity markets (their "market value") declines. While in conventional power systems, the market value may converge to zero, this study demonstrates that "green" hydrogen production, through adding electricity demand in low-price hours, can effectively and permanently halt the decline. With an analytical derivation, a Monte Carlo simulation, and a numerical electricity market model, I find that - due to flexible hydrogen production - market values in 2050 likely converge above €19 ± 9 per MWh for solar energy and above €27 ± 8 per MWh for wind energy. This is in the range of the projected levelized costs of renewables and has profound implications. Market-based renewables may hence be within reach.}, language = {en} } @article{RuhnauHennigMadlener, author = {Ruhnau, Oliver and Hennig, Patrick and Madlener, Reinhard}, title = {Economic implications of forecasting electricity generation from variable renewable energy sources}, series = {Renewable Energy}, journal = {Renewable Energy}, number = {161}, issn = {0960-1481}, doi = {10.1016/j.renene.2020.06.110}, pages = {1318 -- 1327}, abstract = {Short-term forecasting of electricity generation from variable renewable energy sources is not an end in itself but should provide some net benefit to its user. In the case of electricity trading, which is in the focus of this paper, the benefit can be quantified in terms of an improved economic outcome. Although some effort has been made to evaluate and to improve the profitability of electricity forecasts, the understanding of the underlying effects has remained incomplete so far. In this paper, we develop a more comprehensive theoretical framework of the connection between the statistical and the economic properties of day-ahead electricity forecasts. We find that, apart from the accuracy and the bias, which have already been extensively researched, the correlation between the forecast errors and the market price spread determines the economic implications - a phenomenon which we refer to as 'correlation effect'. Our analysis is completed by a case study on solar electricity forecasting in Germany which illustrates the relevance and the limits of both our theoretical framework and the correlation effect.}, language = {en} }