Cost–Benefit Analysis for Flexibility in Hydrothermal Power Systems

Abstract

The world is experiencing an energy transition, migrating from fossil fuels to renewables, which are usually intermittent and, therefore, require flexibility to keep the power system reliable. Although system flexibility is a well-known theme of research, the question “What is a fair cost for flexibility?” remains to be answered. The present paper proposes a metric to estimate the value of a flexible resource to a power system. This metric is especially important in hydroelectric systems, where the flexibility of the hydro portfolio is uncertain and subject to seasonal changes and other considerations such as agricultural use. The valuation of a flexible resource by its cost–benefit is necessary since its installation generates operational savings to the entire system. A combined project cost and system overall savings is proposed to assess the net cost of a flexible resource. The net cost of flexibility can be used as a metric to rank flexibility candidates in systems with large amounts of renewable energy. A simplified case study of the Brazilian energy system is presented, and the flexibility solutions are evaluated according to the new metric. Results show how different technologies impact the system overall costs and the importance of analyzing system needs (both short and medium terms) when planning the expansion of flexibility in hydro systems.