In order to facilitate large-scale deployment of renewable energy on the U.S. power grid, batteries are essential to ensure consistent power supply. In the meantime, there are costs for both generators and batteries to be connected to the U.S. power grid, known as interconnection costs, which are high in places lacking grid infrastructure and hard to connect to the power grid.
A study supported by a University of Maryland Grand Challenges Grant and led by Assistant Professor of Economics Chenyu Yang is examining the current locations of batteries and determining whether they may be sub-optimal. As part of this work, Dr. Yang is planning to assemble new data sets on interconnection costs from engineering studies and integrate them with pricing and production data from electricity markets. He and his team will then use the data to develop and estimate models of generator and battery locations and compute the welfare gains from optimal mechanisms to site new generators and batteries.
The team’s work on interconnection queues has attracted additional support from Resources for the Future. In the first paper for this project, the team evaluated various reforms of interconnection queues and find that a simple entry fee can reduce the congestion in the queue and result in gigawatts of additional renewable resource capacity in PJM (which manages the electricity transmission in the mid-Atlantic region). In the second paper, the team found that the PJM grid has become increasingly congested. The resulting higher network upgrade costs have a larger effect on generator withdrawals from the queue than the costs of building infrastructure to connect to the grid. The team identified this increase across different generator fuel types, and these costs are higher for generators on the eastern coast.
This work by Dr. Yang and his team has been widely presented at many conferences and university seminars, including the NBER Industrial Organization Meeting, the NBER Environment and Energy Economics
meeting and CEPR Applied Industrial Organization Conference.
For more information, visit: https://research.umd.edu/power-grid