Electricity storage and transmission: Complements or substitutes?

Highlights: • We study the techno-economic interdependence of power storage and transmission. • We identify conditions for storage and transmission to be complements or substitutes. • We underline theoretical findings by use of Italian data. • Our results may prevent design errors in energy infrastructure planning. Electricity from renewable sources often cannot be generated when and where it is needed. To deal with these temporal and spatial discrepancies, one frequently proposed approach is to expand storage capacities and transmission grids. It is often argued that the two technologies substitute each other, such that deploying one reduces the need for the other. Using a theoretical model, we show that storage capacities and transmission grids can also be complements if electricity system costs are minimized. We present the conditions that determine the kind of interdependence at specific storage locations: the characteristics of transmission congestion, i.e., during peak or off-peak and uni- or bidirectional as well as the alignment of marginal generation costs between adjacent regions. By applying our theoretical insights to Italian power system data, we obtain empirical evidence that storage and transmission can act as either substitutes or complements. Planners of long-lasting and costly infrastructure can use the results to avoid design errors such as a misplacement of storage within the system.