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Small systems, big targets: Power sector reforms and renewable energy in small systems

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  • Nepal, Rabindra
  • Jamasb, Tooraj
  • Sen, Anupama

Abstract

There is some consensus that the traditional energy-only electricity markets, where prices are based on system marginal cost, cannot function efficiently with both fossil fuels and renewables, resulting in market disruptions and price volatility. Consequently, much effort has been focused on how to integrate these different resources in larger and mature electricity systems such as the use of capacity markets in addition to energy-only markets. This paper argues that the effectiveness of competition is limited by the size of an electricity system and there is a threshold size (and associated characteristics such as tropical locations, lack of access, and the prevalence of remote communities of consumers) below which competition will not produce the expected outcomes. This paper contributes to the policy discourse by discussing the reform of small electricity systems to integrate renewable energy via the means of three case studies: Nicaragua, El Salvador, and Australia's Northern Territory. The paper concludes that electricity reforms and renewables can be complementary in small systems when supported by appropriate instruments and incentives. We draw policy lessons for other small systems that are pursuing a triad of objectives including electricity reform, large-scale renewables development and improving energy access.

Suggested Citation

  • Nepal, Rabindra & Jamasb, Tooraj & Sen, Anupama, 2018. "Small systems, big targets: Power sector reforms and renewable energy in small systems," Energy Policy, Elsevier, vol. 116(C), pages 19-29.
    • Handle: RePEc:eee:enepol:v:116:y:2018:i:c:p:19-29
    DOI: 10.1016/j.enpol.2018.01.013
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Piotr F Borowski, 2019. "Adaptation strategy on regulated markets of power companies in Poland," Energy & Environment, , vol. 30(1), pages 3-26, February.
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    4. She, Zhen-Yu & Meng, Gang & Xie, Bai-Chen & O'Neill, Eoghan, 2020. "The effectiveness of the unbundling reform in China’s power system from a dynamic efficiency perspective," Applied Energy, Elsevier, vol. 264(C).
    5. Asantewaa, Adwoa & Jamasb, Tooraj & Llorca, Manuel, 2023. "Electricity sector reforms and cost efficiency: The case of small electricity systems in Sub-Sahara Africa," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 880-893.
    6. Asantewaa, Adwoa & Jamasb, Tooraj & Llorca, Manuel, 2022. "Reforming Small Electricity Systems: Market Design and Competition," Working Papers 12-2022, Copenhagen Business School, Department of Economics.
    7. Oriana Gava & Fabio Bartolini & Francesca Venturi & Gianluca Brunori & Alberto Pardossi, 2020. "Improving Policy Evidence Base for Agricultural Sustainability and Food Security: A Content Analysis of Life Cycle Assessment Research," Sustainability, MDPI, vol. 12(3), pages 1-29, February.
    8. Proudlove, Richard & Finch, Sue & Thomas, Sebastian, 2020. "Factors influencing intention to invest in a community owned renewable energy initiative in Queensland, Australia," Energy Policy, Elsevier, vol. 140(C).

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    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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