IDEAS home Printed from
   My bibliography  Save this article

Carbon Price instead of Support Schemes: Wind Power Investments by the Electricity Market


  • Marie Petitet, Dominique Finon, and Tanguy Janssen


This paper studies wind power development within electricity markets with a significant carbon price as the sole incentive. Simulation of electricity market and investment decisions by System Dynamics modelling is used to trace the evolution of the electricity generation mix over a 20-year period from an initially thermal system. A range of carbon prices is tested to determine the value above which market-driven development of wind power becomes economically possible. This requires not only economic competitiveness in terms of cost-price, but also profitability versus traditional fossil-fuel technologies. Results stress that wind power is profitable for investors only if the carbon price is significantly higher than the price required for making wind power MWh's cost-price competitive on the basis of levelized costs. In this context, the market-driven development of wind power seems only possible if there is a strong commitment to climate policy, reflected in a stable and high carbon price. Moreover, market-driven development of wind power becomes more challenging if nuclear is part of investment options.

Suggested Citation

  • Marie Petitet, Dominique Finon, and Tanguy Janssen, 2016. "Carbon Price instead of Support Schemes: Wind Power Investments by the Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
  • Handle: RePEc:aen:journl:ej37-4-petitet

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. repec:dau:papers:123456789/11199 is not listed on IDEAS
    2. 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.
    3. Philippe Menanteau & Dominique Finon & Marie-Laure Lamy, 2003. "Prices versus quantities :environmental policies for promoting the development of renewable energy," Post-Print halshs-00480457, HAL.
    4. Jan Horst Keppler & Marco Cometto, 2013. "Short-term and Long-Term System Effects of Intermittent Renewables on Nuclear Energy and the Electricity Mix," Post-Print hal-01609455, HAL.
    5. Klessmann, Corinna & Nabe, Christian & Burges, Karsten, 2008. "Pros and cons of exposing renewables to electricity market risks--A comparison of the market integration approaches in Germany, Spain, and the UK," Energy Policy, Elsevier, vol. 36(10), pages 3646-3661, October.
    6. Paul L. Joskow, 2011. "Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies," American Economic Review, American Economic Association, vol. 101(3), pages 238-241, May.
    7. Cepeda, Mauricio & Finon, Dominique, 2011. "Generation capacity adequacy in interdependent electricity markets," Energy Policy, Elsevier, vol. 39(6), pages 3128-3143, June.
    8. Roques, Fabien A. & Newbery, David M. & Nuttall, William J., 2008. "Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach," Energy Economics, Elsevier, vol. 30(4), pages 1831-1849, July.
    9. 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.
    10. Menanteau, Philippe & Finon, Dominique & Lamy, Marie-Laure, 2003. "Prices versus quantities: choosing policies for promoting the development of renewable energy," Energy Policy, Elsevier, vol. 31(8), pages 799-812, June.
    11. repec:dau:papers:123456789/13149 is not listed on IDEAS
    12. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    13. Christian Gollier and Jean Tirole, 2015. "Negotiating effective institutions against climate change," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    14. Ford, Andrew, 2001. "Waiting for the boom: : a simulation study of power plant construction in California," Energy Policy, Elsevier, vol. 29(11), pages 847-869, September.
    15. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Petitet, Marie & Finon, Dominique & Janssen, Tanguy, 2017. "Capacity adequacy in power markets facing energy transition: A comparison of scarcity pricing and capacity mechanism," Energy Policy, Elsevier, vol. 103(C), pages 30-46.
    2. Quentin Perrier, 2017. "The French nuclear bet," Policy Papers 2017.01, FAERE - French Association of Environmental and Resource Economists.
    3. Quentin Perrier, 2017. "The French nuclear bet," CIRED Working Papers halshs-01487296, HAL.
    4. Quentin Perrier, 2017. "The French Nuclear Bet," Working Papers 2017.18, Fondazione Eni Enrico Mattei.

    More about this item

    JEL classification:

    • F0 - International Economics - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:ej37-4-petitet. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.