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Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain

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  • Sáenz de Miera, Gonzalo
  • del Ri­o González, Pablo
  • Vizcaino, Ignacio
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    Abstract

    It is sometimes argued that renewables are "expensive". However, although it is generally true that the private costs of renewable electricity generation are certainly above those of conventional electricity, that statement fails to consider the social benefits provided by electricity from renewable energy sources (RES-E), including environmental and socioeconomic ones. This paper empirically analyses an additional albeit usually neglected benefit: the reduction in the wholesale price of electricity as a result of more RES-E generation being fed into the grid. The case of wind generation in Spain shows that this reduction is greater than the increase in the costs for the consumers arising from the RES-E support scheme (the feed-in tariffs), which are charged to the final consumer. Therefore, a net reduction in the retail electricity price results, which is positive from a consumer point of view. This provides an additional argument for RES-E support and contradicts one of the usual arguments against RES-E deployment: the excessive burden on the consumer.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 9 (September)
    Pages: 3345-3359

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:9:p:3345-3359

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    Web page: http://www.elsevier.com/locate/enpol

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    1. Unger, Thomas & Ahlgren, Erik O., 2005. "Impacts of a common green certificate market on electricity and CO2-emission markets in the Nordic countries," Energy Policy, Elsevier, vol. 33(16), pages 2152-2163, November.
    2. Klaus Skytte, 2006. "Interplay between Environmental Regulation and Power Markets," EUI-RSCAS Working Papers 4, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    3. Bode, Sven, 2006. "On the impact of renewable energy support schemes on power prices," HWWI Research Papers 4-7, Hamburg Institute of International Economics (HWWI).
    4. Morthorst, P. E., 2003. "National environmental targets and international emission reduction instruments," Energy Policy, Elsevier, vol. 31(1), pages 73-83, January.
    5. Crampes, Claude & Fabra, Natalia, 2004. "The Spanish Electricity Industry: Plus ça change..," IDEI Working Papers 317, Institut d'Économie Industrielle (IDEI), Toulouse.
    6. Crampes , C. & Fabra , N., 2005. "The Spanish Electricity Industry: Plus ça change …," Cambridge Working Papers in Economics 0502, Faculty of Economics, University of Cambridge.
    7. Morthorst, P. E., 2001. "Interactions of a tradable green certificate market with a tradable permits market," Energy Policy, Elsevier, vol. 29(5), pages 345-353, April.
    8. Jensen, Stine Grenaa & Skytte, Klaus, 2003. "Simultaneous attainment of energy goals by means of green certificates and emission permits," Energy Policy, Elsevier, vol. 31(1), pages 63-71, January.
    9. Hindsberger, Magnus & Nybroe, Malene Hein & Ravn, Hans F. & Schmidt, Rune, 2003. "Co-existence of electricity, TEP, and TGC markets in the Baltic Sea Region," Energy Policy, Elsevier, vol. 31(1), pages 85-96, January.
    10. Rathmann, M., 2007. "Do support systems for RES-E reduce EU-ETS-driven electricity prices?," Energy Policy, Elsevier, vol. 35(1), pages 342-349, January.
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