Contracting for wind generation
AbstractThe UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) or a premium FiT (pFiT) for all generation regardless of type. I argue that neither is suitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £70 million/yr by 2020, while the cost of the increased risk incurred by a pFiT might add another £180 m/yr. If similar savings were made to projected off-shore wind investments the savings might be three times as high.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1143.
Date of creation: 21 Jul 2011
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Other versions of this item:
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Toke, David, 2011. "UK Electricity Market Reform—revolution or much ado about nothing?," Energy Policy, Elsevier, vol. 39(12), pages 7609-7611.
- Claire M. Weiller & Michael G. Pollitt, 2013. "Platform Markets and Energy Services," Cambridge Working Papers in Economics 1361, Faculty of Economics, University of Cambridge.
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