The impacts on climate mitigation costs of considering curtailment and storage of variable renewable energy in a general equilibrium model

The curtailment and storage associated with the fluctuation of electricity supplied by variable renewable energy (VRE) may limit its penetration into electricity systems. Therefore, these factors need to be explicitly treated in the integrated assessment models (IAMs). This study improves the representation of curtailment and storage of VRE in a computable general equilibrium (CGE) model. With the data generated from an hourly power sector model, curtailment and storage of VRE electricity are treated as a function of the shares of solar and wind in the electricity mix. This relationship is incorporated into a CGE model and we also updated the VRE costs and resource potential. The results show that with such improvement, by 2100, in a 450 ppm atmospheric CO2 equivalent concentration (henceforth ppm) scenario, some electricity generated from VRE is either curtailed (2.1%) or needs to be stored (2.9%). In contrast, if VRE fluctuation is not considered, the long-term global economic cost of carbon mitigation is significantly underestimated (by 52%) in the same scenario. Conversely, updating the VRE costs and resource potential leads to a decrease in mitigation costs. Our simulation implies that the fluctuation of VRE cannot be ignored and needs to be incorporated into CGE models. Moreover, in addition to storage with batteries, many other options are available to reduce curtailment of VRE. The top-down type CGE model has limitations to fully incorporate all aspects due to its limited spatial, temporal, and technological resolution.