A unit commitment and economic dispatch model of the GB electricity market – Formulation and application to hydro pumped storage
Chi Kong Chyong, David Newbery
Abstract
We present a calibrated unit commitment dispatch model of the GB electricity market applied to an economic analysis of the four existing hydro pumped storage (PS) stations in GB. More variable renewable electricity (VRE) increases PS profit by an amount dependent on the generation mix. With a large share of coal, a 1 percentage point (p.p) increase in VRE increases total PS profit by an average of 2.3 p.p. With a more flexible system, to achieve a similar profitability, the share of wind and solar should rise to more than 60% of supply. Inflexible coal with high VRE increases price volatility that drives PS arbitrage revenue. Higher system flexibility smooths VRE variability and limits PS price arbitrage, increasing the role of PS balancing and ancillary service revenue. Between 2015 and 22 PS stations were inactive in managing transmission constraints but provided 18% of fast reserve, response and other reserve services in 2022. Stacking up the modelled revenue from price arbitrage and 2022 balancing and ancillary services revenues against the ongoing fixed costs suggests that the four existing PS stations are quite profitable. However, the revenues will not be enough to cover capex and opex of a new 600 MW PS station without more balancing and ancillary services market opportunities.