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Contracting for Wind Generation

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  • David M. Newbery

Abstract

The UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) for all generation regardless of type. I argue that a standard CfD is unsuitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £56 million/yr by 2020 and £170 million/yr for all wind. The extra costs of investment risk could be comparable and additional.

Suggested Citation

  • David M. Newbery, 2012. "Contracting for Wind Generation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    • Handle: RePEc:aen:eeepjl:1_2_a02
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    References listed on IDEAS

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    1. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
    2. Frieder Borggrefe & Karsten Neuhoff, 2011. "Balancing and Intraday Market Design: Options for Wind Integration," Discussion Papers of DIW Berlin 1162, DIW Berlin, German Institute for Economic Research.
    3. David M. Newbery, 2012. "Contracting for Wind Generation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    4. Grubb,Michael & Jamasb,Tooraj & Pollitt,Michael G. (ed.), 2008. "Delivering a Low Carbon Electricity System," Cambridge Books, Cambridge University Press, number 9780521888844.
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    Cited by:

    1. Richter, Laura-Lucia & Pollitt, Michael G., 2018. "Which smart electricity service contracts will consumers accept? The demand for compensation in a platform market," Energy Economics, Elsevier, vol. 72(C), pages 436-450.
    2. David M. Newbery, 2012. "Reforming Competitive Electricity Markets to Meet Environmental Targets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    3. Michael G. Pollitt & Lewis Dale, 2018. "Restructuring the Chinese Electricity Supply Sector – How industrial electricity prices are determined in a liberalized power market: lessons from Great Britain," Working Papers EPRG 1839, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    5. Newbery, David, 2016. "Missing money and missing markets: Reliability, capacity auctions and interconnectors," Energy Policy, Elsevier, vol. 94(C), pages 401-410.
    6. Zapata, Sebastian & Castaneda, Monica & Franco, Carlos Jaime & Dyner, Isaac, 2019. "Clean and secure power supply: A system dynamics based appraisal," Energy Policy, Elsevier, vol. 131(C), pages 9-21.
    7. G. Cornelis van Kooten, 2015. "All you want to know about the Economics of Wind Power," Working Papers 2015-07, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    8. Paul Lehmann & Felix Creutzig & Melf-Hinrich Ehlers & Nele Friedrichsen & Clemens Heuson & Lion Hirth & Robert Pietzcker, 2012. "Carbon Lock-Out: Advancing Renewable Energy Policy in Europe," Energies, MDPI, vol. 5(2), pages 1-32, February.
    9. Higgins, P. & Foley, A.M. & Douglas, R. & Li, K., 2014. "Impact of offshore wind power forecast error in a carbon constraint electricity market," Energy, Elsevier, vol. 76(C), pages 187-197.
    10. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
    11. Balta-Ozkan, Nazmiye & Yildirim, Julide & Connor, Peter M., 2015. "Regional distribution of photovoltaic deployment in the UK and its determinants: A spatial econometric approach," Energy Economics, Elsevier, vol. 51(C), pages 417-429.
    12. Finn Roar Aune & Rolf Golombek, 2020. "Are carbon prices redundant in the 2030 EU climate and energy policy package?," Discussion Papers 940, Statistics Norway, Research Department.
    13. Toke, David, 2011. "UK Electricity Market Reform—revolution or much ado about nothing?," Energy Policy, Elsevier, vol. 39(12), pages 7609-7611.
    14. Claire M. Weiller & Michael G. Pollitt, 2013. "Platform Markets and Energy Services," Cambridge Working Papers in Economics 1361, Faculty of Economics, University of Cambridge.
    15. David M. Newbery, 2012. "Contracting for Wind Generation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).

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