Large Scale Integration of Wind Energy by Financial Mechanisms for Support of Pumped Hydro Storage Installations

Intermittent nature of the renewable energy sources (RES) like wind, solar and waves is one of the limitation factors for their higher penetration in the networks. This problem was firstly recognized in the autonomous networks as RES penetration in those systems easily reached technical limits. Now, similar problems are facing big power systems when RES penetration exceeds certain levels. Effective use of energy storage could solve the intermittency problem and it could increase RES penetration. Today the most widespread storage in power systems is the pumped or reversible hydro storage (PHS) which has many advantages and can provide multiple services in transmission, distribution and generation markets (e.g. support to RES integration, grid up-grade and ancillary services, load shifting etc.). Currently, all services in electricity market are not properly regulated and commercialised so there is big uncertainty how investments in energy storage will be recovered. Several EU documents support the development of measures that could provide confidence to those investing in storage so that they will be able to realise benefit from their investment. In this paper we propose development of Feed-in tariffs (FIT) for Pumped Hydro Storage as support to RES integration and we discuss the necessary market organization for their successful application. Proposed FIT for PHS is also tested in market environment trough developed mathematical models and by use of the historical market data. Proposers of FIT for PHS systems should take into account the local particularities of possible development of PHS and according to that, they should propose one or several levels of FIT. Supported level of FIT and limit on load factor of turbines in PHS, for particular energy system, should be optimized according to desirable level of excess production from RES or according the needs of security of energy supply provided by PHS.