Electricity Production with Intermittent Sources
AbstractThe paper analyzes the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first characterize the first-best dispatch and investment in the two types of energy. We put the accent on the availability of the intermittent source as a major parameter of optimal capacity investment. We then analyze decentralization through competitive market mechanisms. We show that decentralizing first best requires to price electricity contingently on wind or solar availability. By contrast, traditional meters impose a second-best uniform pricing, which distorts the optimal mix of energy sources. Decentralizing the either cross-subsidy from the intermittent source to the reliable source of energy or structural integration of the two types of technology.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 608.
Date of creation: Mar 2010
Date of revision:
Publication status: Published in Resource and Energy Economics, vol.�34, n°3, septembre 2012, p.�319-336.
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- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-31 (All new papers)
- NEP-ENE-2010-07-31 (Energy Economics)
- NEP-REG-2010-07-31 (Regulation)
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- Alfredo Garcia & Juan Alzate & Jorge Barrera, 2012. "Regulatory design and incentives for renewable energy," Journal of Regulatory Economics, Springer, vol. 41(3), pages 315-336, June.
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