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On the impact of renewable energy support schemes on power prices

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  • Bode, Sven
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    Abstract

    Power production from renewable energies is supported through special support schemes in almost all industrialised countries. This is because they are generally not competitive today although their use offers a number of benefits that are not considered by energy markets. These support schemes need to be financed, though. Two main options can be observed: Either support through the general public budget or through a renewable energy mark-up that is charged to final power consumers. As this mark-up increases power costs for consumers, the support schemes have been criticised, especially by power intensive industries. It argues that it looses competitiveness on the world marked with higher electricity costs due to the mark-up. However, this argument is short-sighted as it only reflects one side of the medal, namely the mark-up. The increased used of renewable energies may also have an influence on the power price on the whole sale market. Based on the analysis of a specific case in Germany the present paper analyses this impact on the whole market more generally. Assuming a simple power market, I show that the power costs for consumers may decrease due to the support scheme. If and to what extend power costs decrease depends on the specific characteristics of the market and the value attached to the greenness of power from renewable energies. --

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    File URL: http://econstor.eu/bitstream/10419/48172/1/663968380.pdf
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    Bibliographic Info

    Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 4-7.

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    Date of creation: 2006
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    Handle: RePEc:zbw:hwwirp:4-7

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    Keywords: Renewable energy suppport schemes;

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    References

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    1. Meyer, Niels I., 2003. "European schemes for promoting renewables in liberalised markets," Energy Policy, Elsevier, vol. 31(7), pages 665-676, June.
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    Cited by:
    1. Sáenz de Miera, Gonzalo & del Ri­o González, Pablo & Vizcaino, Ignacio, 2008. "Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain," Energy Policy, Elsevier, vol. 36(9), pages 3345-3359, September.
    2. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    3. Thure Traber & Claudia Kemfert, 2007. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions and Profits: An Analysis Based on a European Electricity Market Model," Discussion Papers of DIW Berlin 712, DIW Berlin, German Institute for Economic Research.
    4. 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.
    5. GARCIA-ALVAREZ, María Teresa & VARELA-CANDAMIO, Laura & NOVO-CORTI, Isabel, 2013. "Renewable Energy, Electricity Market And Employment: The Case Of Spain," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 13(1), pages 131-142.
    6. Munoz, Miquel & Oschmann, Volker & David Tabara, J., 2007. "Harmonization of renewable electricity feed-in laws in the European Union," Energy Policy, Elsevier, vol. 35(5), pages 3104-3114, May.
    7. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.

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