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Electricity Production with Intermittent Sources

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  • Ambec, Stefan
  • Crampes, Claude

Abstract

The 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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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-152.

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Date of creation: 24 Mar 2010
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Publication status: Published in Resource and Energy Economics, vol.�34, n°3, septembre 2012, p.�319-336.
Handle: RePEc:tse:wpaper:22631

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Cited by:
  1. 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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