IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/2114.html
   My bibliography  Save this paper

Managing intermittency in the electricity market

Author

Abstract

We analyze the integration of intermittent renewables-based technologies into an electricity mix comprising of conventional energy. Intermittency is modeled by a contingent electricity market and we introduce demand-side flexibility through the retailing structure. Retailers propose diversified electricity contracts at different prices allowing consumers to choose their optimal electricity consumption. These contracts are modeled by a set of state-contingent electricity delivery contracts. We show existence and uniqueness of a competitive equilibrium of the contingent wholesale and retail markets. We provide a welfare analysis and only obtain constraint efficiency due to a limited number of delivery contracts. Finally, we discuss the conditions under which changing the set of delivery contracts improves penetration of renewables and increases welfare. This provides useful policy insights for managing intermittency and achieving renewable capacity objectives.

Suggested Citation

  • Jean-Henry Ferrasse & Nandeeta Neerunjun & Hubert Stahn, 2021. "Managing intermittency in the electricity market," AMSE Working Papers 2114, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:2114
    as

    Download full text from publisher

    File URL: https://www.amse-aixmarseille.fr/sites/default/files/working_papers/wp_2021_-_nr_14.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Benitez, Liliana E. & Benitez, Pablo C. & van Kooten, G. Cornelis, 2008. "The economics of wind power with energy storage," Energy Economics, Elsevier, vol. 30(4), pages 1973-1989, July.
    2. Paul Joskow & Jean Tirole, 2007. "Reliability and competitive electricity markets," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 60-84, March.
    3. Severin Borenstein & Stephen Holland, 2005. "On the Efficiency of Competitive Electricity Markets with Time-Invariant Retail Prices," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 469-493, Autumn.
    4. Abrell, Jan & Rausch, Sebastian, 2016. "Cross-country electricity trade, renewable energy and European transmission infrastructure policy," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 87-113.
    5. Ramteen Sioshansi, 2011. "Increasing the Value of Wind with Energy Storage," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-30.
    6. Ambec, Stefan & Crampes, Claude, 2012. "Electricity provision with intermittent sources of energy," Resource and Energy Economics, Elsevier, vol. 34(3), pages 319-336.
    7. Richard Green and Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    8. Aude Pommeret & Katheline Schubert, 2019. "Energy Transition with Variable and Intermittent Renewable Electricity Generation," CESifo Working Paper Series 7442, CESifo.
    9. Sébastien Rouillon, 2015. "Optimal and Equilibrium Investment in the Intermittent Generation Technologies," Revue d'économie politique, Dalloz, vol. 125(3), pages 415-452.
    10. Yang, Yuting, 2020. "Electricity Interconnection with Intermittent Renewables," TSE Working Papers 20-1075, Toulouse School of Economics (TSE).
    11. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    12. Ignacio J. Perez-Arriaga & Carlos Batlle, 2012. "Impacts of Intermittent Renewables on Electricity Generation System Operation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    13. Widén, Joakim & Carpman, Nicole & Castellucci, Valeria & Lingfors, David & Olauson, Jon & Remouit, Flore & Bergkvist, Mikael & Grabbe, Mårten & Waters, Rafael, 2015. "Variability assessment and forecasting of renewables: A review for solar, wind, wave and tidal resources," Renewable and Sustainable Energy Reviews, Elsevier, vol. 44(C), pages 356-375.
    14. Passey, Robert & Spooner, Ted & MacGill, Iain & Watt, Muriel & Syngellakis, Katerina, 2011. "The potential impacts of grid-connected distributed generation and how to address them: A review of technical and non-technical factors," Energy Policy, Elsevier, vol. 39(10), pages 6280-6290, October.
    15. Michael Magill & Martine Quinzii, 2002. "Theory of Incomplete Markets, Volume 1," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632543, December.
    16. Verzijlbergh, R.A. & De Vries, L.J. & Dijkema, G.P.J. & Herder, P.M., 2017. "Institutional challenges caused by the integration of renewable energy sources in the European electricity sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 660-667.
    17. Eaves, B. Curtis & Schmedders, Karl, 1999. "General equilibrium models and homotopy methods," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1249-1279, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferrasse, Jean-Henry & Neerunjun, Nandeeta & Stahn, Hubert, 2022. "Intermittency and electricity retailing: An incomplete market approach," Mathematical Social Sciences, Elsevier, vol. 120(C), pages 24-36.
    2. Helm, Carsten & Mier, Mathias, 2019. "On the efficient market diffusion of intermittent renewable energies," Energy Economics, Elsevier, vol. 80(C), pages 812-830.
    3. Nandeeta Neerunjun & Hubert Stahn, 2023. "Renewable energy support: pre-announced policies and (in)-efficiency," AMSE Working Papers 2335, Aix-Marseille School of Economics, France.
    4. Carsten Helm & Mathias Mier, 2016. "Efficient diffusion of renewable energies: A roller-coaster ride," Working Papers V-389-16, University of Oldenburg, Department of Economics, revised Apr 2016.
    5. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(C).
    6. Carsten Helm & Mathias Mier, 2020. "Steering the Energy Transition in a World of Intermittent Electricity Supply: Optimal Subsidies and Taxes for Renewables Storage," ifo Working Paper Series 330, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Helm, Carsten & Mier, Mathias, 2021. "Steering the energy transition in a world of intermittent electricity supply: Optimal subsidies and taxes for renewables and storage," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    8. Fadoua Chiba & Sébastien Rouillon, 2020. "Intermittent Electric Generation Technologies and Smart Meters: Substitutes or Complements," Revue d'économie politique, Dalloz, vol. 130(4), pages 573-613.
    9. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    10. Nandeeta Neerunjun, 2022. "Emissions pricing instruments with intermittent renewables: second-best policy," Working Papers hal-03740013, HAL.
    11. Yang, Yuting, 2020. "Electricity Interconnection with Intermittent Renewables," TSE Working Papers 20-1075, Toulouse School of Economics (TSE).
    12. Pommeret, Aude & Schubert, Katheline, 2022. "Optimal energy transition with variable and intermittent renewable electricity generation," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    13. Mier, Mathias & Weissbart, Christoph, 2020. "Power markets in transition: Decarbonization, energy efficiency, and short-term demand response," Energy Economics, Elsevier, vol. 86(C).
    14. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    15. Bouckaert, Jan & Van Moer, Geert, 2017. "Horizontal subcontracting and investment in idle dispatchable power plants," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 307-332.
    16. Dato, Prudence & Durmaz, Tunç & Pommeret, Aude, 2020. "Smart grids and renewable electricity generation by households," Energy Economics, Elsevier, vol. 86(C).
    17. Narita, Daiju & Requate, Till, 2021. "Price vs. quantity regulation of volatile energy supply and market entry of RES-E operators," Energy Economics, Elsevier, vol. 101(C).
    18. Neetzow, Paul, 2021. "The effects of power system flexibility on the efficient transition to renewable generation," Applied Energy, Elsevier, vol. 283(C).
    19. Fadoua CHIBA, 2016. "Optimal taxation with intermittent generation," Cahiers du GREThA (2007-2019) 2016-26, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    20. Nandeeta Neerunjun, 2022. "Emissions pricing instruments with intermittent renewables: second-best policy," AMSE Working Papers 2215, Aix-Marseille School of Economics, France.

    More about this item

    Keywords

    electricity market; renewables; intermittency; demand exibility;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:2114. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gregory Cornu (email available below). General contact details of provider: https://edirc.repec.org/data/amseafr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.