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Incentives for the Long-Term Integration of Renewable Energies: A Plea for a Market Value Model

Author

Listed:
  • Karsten Neuhoff
  • Nils May
  • Jörn Richstein

Abstract

Due to increasing shares of renewable energies in electricity production, the cost-effective system integration of these installations is becoming more and more important. Technologies and locations are viewed as system-friendly when they are more cost-efficient and easier to integrate because they, unlike other installations, produce at times when electricity is more valuable. This report shows that project developers of renewable energies in Germany have had limited incentivesto invest in system-friendly installations. A market value model is derived based on five criteria for the further development of support instruments. This model creates appropriate incentives for investments in system-friendly installation while simultaneously avoiding additional financial risks for project developers. With such an approach based on a market value factor, the support costs for renewable energies as well as for levies in the overall electricity system and for the energy transition in general can be minimized over the long-term.

Suggested Citation

  • Karsten Neuhoff & Nils May & Jörn Richstein, 2017. "Incentives for the Long-Term Integration of Renewable Energies: A Plea for a Market Value Model," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 7(46/47), pages 467-476.
    • Handle: RePEc:diw:diwdeb:2017-46-1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.571589.de/diw_econ_bull_2017-46-1.pdf
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    Citations

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    Cited by:

    1. Tooraj Jamasb and Manuel Llorca, 2019. "Energy Systems Integration: Economics of a New Paradigm," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    2. Klie, Leo & Madlener, Reinhard, 2020. "Concentration Versus Diversification: A Spatial Deployment Approach to Improve the Economics of Wind Power," FCN Working Papers 2/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised May 2021.
    3. Özdemir, Özge & Hobbs, Benjamin F. & van Hout, Marit & Koutstaal, Paul R., 2020. "Capacity vs energy subsidies for promoting renewable investment: Benefits and costs for the EU power market," Energy Policy, Elsevier, vol. 137(C).
    4. Özdemir, Ö. & Hobbs, B. & van Hout, M. & Koutstaal, P., 2019. "Capacity vs Energy Subsidies for Renewables: Benefits and Costs for the 2030 EU Power Market," Cambridge Working Papers in Economics 1927, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Renewable energy; feed-in premium; system-friendly wind power; integration of renewable energy;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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