As renewable energy sources gain momentum globally, the challenge of maintaining grid stability becomes increasingly pronounced, particularly in regions like Jeju Island, South Korea. The island, which aims to achieve 100% of its electricity demand from renewable sources by 2030, has experienced significant disruptions due to the rapid growth of its renewable energy capacity. A recent study by Gyuhyeon Bae from the Department of Energy and Electrical Engineering at Tech University of Korea proposes a novel solution to this pressing issue: a refined incentive structure for demand response (DR) that considers the initial investment costs of energy storage systems (ESS).
The study addresses a critical gap in existing research by incorporating the high upfront costs associated with ESS into the incentive calculations for DR participation. “Our algorithm not only helps in determining appropriate incentive levels but also enhances the feasibility of ESS investments for companies,” Bae explains. This is particularly relevant as Jeju Island faces increasing instances of renewable energy curtailment; in 2023 alone, there were 181 instances over just 120 days.
The proposed algorithm uses an iterative mixed-integer programming (MIP) optimization method to adjust incentive levels based on the internal rate of return (IRR) that companies aim to achieve. This innovative approach effectively linearizes the nonlinearity in incentive estimation, allowing for a more accurate reflection of the economic realities faced by businesses investing in ESS. The study revealed that incentives needed to meet IRR targets of 5%, 10%, and 15% increased linearly from 142.2 KRW/kWh to 363.0 KRW/kWh. This finding underscores the importance of aligning incentives with the actual costs of ESS, paving the way for increased participation in DR programs.
Bae’s research could have far-reaching implications for the energy sector. By providing a framework for calculating realistic incentives, it encourages companies to adopt ESS, thereby enhancing the stability of power grids reliant on variable renewable energy sources. “This model could contribute to refining policy frameworks to support the broader adoption of DR programs and ESS investments, fostering long-term sustainability in the energy sector,” Bae notes.
The implications of this research extend beyond Jeju Island. As many regions around the world grapple with the integration of renewable energy, the insights provided by Bae’s study could help shape future developments in the field. Governments and utilities can leverage this algorithm to establish more effective incentive structures, ultimately leading to a more resilient and flexible energy landscape.
The study, published in the journal “Energies,” offers a timely and critical examination of how financial considerations can influence the adoption of technologies essential for a sustainable energy future. For those interested in exploring this research further, more information can be found at the Department of Energy and Electrical Engineering, Tech University of Korea.
