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Working Paper | Identifying and Evaluating New Market Opportunities with Capacity Expansion Models

Holger Teichgraeber
Adam R. Brandt
2017

The shift of the electricity system from fossil fuels to renewable energy will require major investments in power generation, transmission lines, energy storage, and demand response technologies. This shift presents large investment opportunities. In this paper, we investigate engineering-based capacity expansion models for high renewable futures, examining the implied capital investment requirements of these scenarios. In particular, we examine the United States, as an example of the value of this approach for anticipating investment opportunities and identifying those with the highest potential for being economically viable. For the United States, key transformations in the electricity sector with respect to capital requirement include:

  • Additional capacity in generation, storage, transmission, and demand response technologies ranging from 11% to 609% of the currently installed capacity;
  • The average utilization factor (capacity factor) of installed power generation and consumption capacity drops; and
  • Renewable-intensive power systems undergo a shift in cost structure away from ongoing operational costs for fuels towards higher upfront costs as the share of renewable generation and energy storage increase.

We conclude that increased used of planning models such as those applied here provide great value to the finance community as it looks to increase the pace of clean energy finance.