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Curtailment of renewable generation: Economic optimality and incentives

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Author Info

  • Klinge Jacobsen, Henrik
  • Schröder, Sascha Thorsten

Abstract

The loss from curtailing generation based on renewable energy sources is generally seen as an unacceptable solution by the public. The main argument is that it is a loss of green energy and an economic loss to curtail generation with near zero marginal costs. However, this view could lead to overinvestment in grid infrastructure and underinvestment in renewable energy sources. This article argues that some curtailment of fluctuating (variable) generation is optimal. We address the possible contributions to total curtailment from involuntary and voluntary curtailment. The costs of curtailment in terms of lost generation are discussed based on market price and support levels including the rationale for compensating generators for losses. The extent of actual curtailment is illustrated by examples from different global markets. In general, both the value of the curtailed energy and the amount of curtailed energy relative to total fluctuating generation is low but rising. Single generators may be affected considerably if insufficient compensation measures are in place. In the future, optimal curtailment will increase along with an increased share of fluctuating renewable generation. Extending renewable generation comparatively cheaply can be achieved by the installation of additional capacity at offshore locations until optimal curtailment levels are reached.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 49 (2012)
Issue (Month): C ()
Pages: 663-675

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Handle: RePEc:eee:enepol:v:49:y:2012:i:c:p:663-675

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

Related research

Keywords: Fluctuating generation; Renewable energy; Regulation;

References

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  1. Klinge Jacobsen, Henrik & Zvingilaite, Erika, 2010. "Reducing the market impact of large shares of intermittent energy in Denmark," Energy Policy, Elsevier, vol. 38(7), pages 3403-3413, July.
  2. Vandezande, Leen & Meeus, Leonardo & Belmans, Ronnie & Saguan, Marcelo & Glachant, Jean-Michel, 2010. "Well-functioning balancing markets: A prerequisite for wind power integration," Energy Policy, Elsevier, vol. 38(7), pages 3146-3154, July.
  3. Brandstätt, Christine & Brunekreeft, Gert & Jahnke, Katy, 2011. "How to deal with negative power price spikes?--Flexible voluntary curtailment agreements for large-scale integration of wind," Energy Policy, Elsevier, vol. 39(6), pages 3732-3740, June.
  4. Skytte, Klaus, 1999. "The regulating power market on the Nordic power exchange Nord Pool: an econometric analysis," Energy Economics, Elsevier, vol. 21(4), pages 295-308, August.
  5. Grohnheit, Poul Erik & Andersen, Frits Møller & Larsen, Helge V., 2011. "Area price and demand response in a market with 25% wind power," Energy Policy, Elsevier, vol. 39(12), pages 8051-8061.
  6. Nicolosi, Marco, 2011. "The impact of RES-E policy setting on integration effects - A detailed analysis of capacity expansion and dispatch results," MPRA Paper 31835, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Gawel, Erik & Purkus, Alexandra, 2013. "Promoting the market and system integration of renewable energies through premium schemes—A case study of the German market premium," Energy Policy, Elsevier, vol. 61(C), pages 599-609.
  2. Wolf-Peter Schill, 2013. "Residual Load, Renewable Surplus Generation and Storage Requirements in Germany," Discussion Papers of DIW Berlin 1316, DIW Berlin, German Institute for Economic Research.
  3. Klinge Jacobsen, Henrik & Hansen, Lise-Lotte P & Schröder, Sascha T & Kitzing, Lena, 2012. "Cooperation mechanisms to achieve EU renewable targets," MPRA Paper 41400, University Library of Munich, Germany.

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