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Building Blocks: Investment in Renewable and Nonrenewable Technologies

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  • James Bushnell

Abstract

This paper examines how the increasing penetration of intermittent renewable generation can change the economic landscape for merchant power investment in conventional thermal generation. An equilibrium model of generation investment is developed, based on the long-standing principles of finding the optimal mix of capital intensive and higher marginal cost resources to serve a market with fluctuating demand. This model is then applied to data on electricity markets from several regions of the western United States to examine how the interaction of increasing wind capacity and electricity market design affects the equilibrium mix of thermal capacity and the revenues earned by renewable suppliers.

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File URL: http://cadmus.eui.eu/bitstream/handle/1814/19421/RSCAS_2011_53.pdf?sequence=1
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Bibliographic Info

Paper provided by European University Institute in its series RSCAS Working Papers with number 2011/53.

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Date of creation: 07 Oct 2011
Date of revision:
Handle: RePEc:rsc:rsceui:2011/53

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Related research

Keywords: Wind generation ; Equilibrium Model ; optimal mix ; Market Design;

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References

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  1. Bushnell, James, 2005. "Electricity Resource Adequacy: Matching Policies and Goals," The Electricity Journal, Elsevier, vol. 18(8), pages 11-21, October.
  2. Borenstein, Severin & Bushnell, James, 2000. "Electricity Restructuring: Deregulation or Reregulation?," Competition Policy Center, Working Paper Series qt22d2q3fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  3. Lamont, Alan D., 2008. "Assessing the long-term system value of intermittent electric generation technologies," Energy Economics, Elsevier, vol. 30(3), pages 1208-1231, May.
  4. Peter Cramton & Steven Stoft, 2005. "A Capacity Market that Makes Sense," Papers of Peter Cramton 05licap, University of Maryland, Department of Economics - Peter Cramton, revised 2005.
  5. Severin Borenstein, 2005. "The Long-Run Efficiency of Real-Time Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 93-116.
  6. Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2005. "Markets for Clean Air," Cambridge Books, Cambridge University Press, number 9780521023894, November.
    • Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2000. "Markets for Clean Air," Cambridge Books, Cambridge University Press, number 9780521660839, November.
  7. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
  8. Palmer, Karen & Ando, Amy, 1998. "Getting on the Map: The Political Economy of State-Level Electricity Restructuring," Discussion Papers dp-98-19-rev, Resources For the Future.
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Citations

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Cited by:
  1. Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers 2013/36, European University Institute.
  2. Chao, Hung-po, 2011. "Efficient pricing and investment in electricity markets with intermittent resources," Energy Policy, Elsevier, vol. 39(7), pages 3945-3953, July.
  3. Cepeda, Mauricio & Finon, Dominique, 2013. "How to correct for long-term externalities of large-scale wind power development by a capacity mechanism?," Energy Policy, Elsevier, vol. 61(C), pages 671-685.
  4. De Jonghe, C. & Hobbs, B. F. & Belmans, R., 2011. "Integrating short-term demand response into long-term investment planning," Cambridge Working Papers in Economics 1132, Faculty of Economics, University of Cambridge.
  5. Hirth, Lion & Ueckerdt, Falko, 2013. "Redistribution effects of energy and climate policy: The electricity market," Energy Policy, Elsevier, vol. 62(C), pages 934-947.
  6. Lion Hirth, 2012. "The Market Value of Variable Renewables," Working Papers 2012.15, Fondazione Eni Enrico Mattei.
  7. Böckers, Veit & Giessing, Leonie & Rösch, Jürgen, 2013. "The green game changer: An empirical assessment of the effects of wind and solar power on the merit order," DICE Discussion Papers 104, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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