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Decarbonizing Electricity Generation with Intermittent Sources of Energy

Author

Listed:
  • Stefan Ambec

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

  • Claude Crampes

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We examine policy instruments that aim to decarbonize electricity production by replacing fossil fuel energy with intermittent renewable sources, namely, wind and solar power. We consider a model of investment, production, and storage with two sources of energy: one is clean but intermittent (wind or solar), whereas the other one is reliable but polluting (thermal power). We first determine the first-best energy mix depending on the social cost of polluting emissions. We then show that, to implement the socially efficient energy mix without a carbon tax, feed-in tariffs and renewable portfolio standards must be complemented with a price cap and volume-limited capacity payments.

Suggested Citation

  • Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Post-Print hal-02285599, HAL.
    • Handle: RePEc:hal:journl:hal-02285599
    DOI: 10.1086/705536
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    electricity; renewables; intermittency; storage; feed-in tariff; carbon emissions;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • 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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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