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Effects of carbon dioxide capture and storage in Germany on European electricity exchange and welfare

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  • Rübbelke, Dirk
  • Vögele, Stefan

Abstract

In the course of European efforts to mitigate global warming, the application of carbon dioxide capture and storage (CCS) technologies is discussed as a potential option. Some political opposition was raised – inter alia – by uncertainties about the effective cost of such technologies. Because of the cost structure of CCS power plants with high ‘flat' investment cost and – in case of high carbon allowance prices – comparable low variable cost, the application of CCS will induce a merit-order effect causing a decline in wholesale electricity prices on the spot market. On the one hand, the reduction of electricity supply cost raises suppliers' rents, while the decline of wholesale electricity prices augments consumers' surpluses. These positive welfare effects tend to mitigate political opposition against CCS. On the other hand, the merit-order effect reduces electricity suppliers' revenues as the wholesale prices decline. This mitigates their scope for additional investments in CCS capacity. In this study, we focus on the influence of CCS in Germany on electricity supplier and consumer surpluses and associated impacts on the scope for investments in additional CCS capacity. By means of the applied model of electricity markets, influences on European electricity exchange and welfare levels are investigated.

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  • Rübbelke, Dirk & Vögele, Stefan, 2013. "Effects of carbon dioxide capture and storage in Germany on European electricity exchange and welfare," Energy Policy, Elsevier, vol. 59(C), pages 582-588.
    • Handle: RePEc:eee:enepol:v:59:y:2013:i:c:p:582-588
    DOI: 10.1016/j.enpol.2013.04.011
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    1. Mohd Yasin, Nazlina Haiza & Maeda, Toshinari & Hu, Anyi & Yu, Chang-Ping & Wood, Thomas K., 2015. "CO2 sequestration by methanogens in activated sludge for methane production," Applied Energy, Elsevier, vol. 142(C), pages 426-434.
    2. Vögele, Stefan & Rübbelke, Dirk, 2013. "Decisions on investments in photovoltaics and carbon capture and storage: A comparison between two different greenhouse gas control strategies," Energy, Elsevier, vol. 62(C), pages 385-392.
    3. Dirk Rübbelke & Stefan Vögele, 2013. "Time and tide wait for no man: pioneers and laggards in the deployment of CCS," Working Papers 2013-13, BC3.
    4. Vögele, Stefan & Rübbelke, Dirk & Mayer, Philip & Kuckshinrichs, Wilhelm, 2018. "Germany’s “No” to carbon capture and storage: Just a question of lacking acceptance?," Applied Energy, Elsevier, vol. 214(C), pages 205-218.

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