IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v138y2020ics0301421520300094.html
   My bibliography  Save this article

Systemic value of electricity sources – What we can learn from the Brazilian experience?

Author

Listed:
  • Romeiro, Diogo Lisbona
  • Almeida, Edmar Luiz Fagundes de
  • Losekann, Luciano

Abstract

The competitiveness of electricity sources is traditionally estimated by levelized cost of electricity (LCOE) compared to the average electricity price. However, the introduction of variable renewable energy sources (VREs) in power systems has evidenced that time, location and availability, are essential to set the marginal value of electricity sources. Overcoming the narrow view of costs for a broad value approach, the literature recognizes that the source comparison must consider the expected marginal value of each alternative, which evolves over time due to sources penetration and system development, changing static and dynamic integration costs. The paper presents the Brazilian experience as forerunner case study for the literature on systemic value, as the country has established a pioneering benefit-cost index (BCI) to compare different sources in centralized expansion auctions, which contracted 100 GW of installed capacity. The BCI analysis is based on hydro predominance, recognizing only static integration costs (backward-looking approach). Nevertheless, the Brazilian system is evolving towards higher short-term variability due to the loss of regularization of hydro reservoirs, limitations to hydropower expansion and VREs penetration. The expansion and operation of the power system are not sensitive to ongoing changes, neglecting dynamic integration costs, which must be incorporated in a forward-looking perspective.

Suggested Citation

  • Romeiro, Diogo Lisbona & Almeida, Edmar Luiz Fagundes de & Losekann, Luciano, 2020. "Systemic value of electricity sources – What we can learn from the Brazilian experience?," Energy Policy, Elsevier, vol. 138(C).
    • Handle: RePEc:eee:enepol:v:138:y:2020:i:c:s0301421520300094
    DOI: 10.1016/j.enpol.2020.111247
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421520300094
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2020.111247?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    References listed on IDEAS

    as
    1. Richard Green and Iain Staffell, 2017. "Prosumage and the British Electricity Market," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    2. Paul Simshauser, 2011. "The Hidden Costs of Wind Generation in a Thermal Power System: What Cost?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 44(3), pages 269-292, September.
    3. Losekann, Luciano & Marrero, Gustavo A. & Ramos-Real, Francisco J. & de Almeida, Edmar Luiz Fagundes, 2013. "Efficient power generating portfolio in Brazil: Conciliating cost, emissions and risk," Energy Policy, Elsevier, vol. 62(C), pages 301-314.
    4. Hirth, Lion & Ueckerdt, Falko & Edenhofer, Ottmar, 2015. "Integration costs revisited – An economic framework for wind and solar variability," Renewable Energy, Elsevier, vol. 74(C), pages 925-939.
    5. Rego, Erik Eduardo, 2013. "Reserve price: Lessons learned from Brazilian electricity procurement auctions," Energy Policy, Elsevier, vol. 60(C), pages 217-223.
    6. 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).
    7. Ueckerdt, Falko & Hirth, Lion & Luderer, Gunnar & Edenhofer, Ottmar, 2013. "System LCOE: What are the costs of variable renewables?," Energy, Elsevier, vol. 63(C), pages 61-75.
    8. Rego, Erik Eduardo & Parente, Virginia, 2013. "Brazilian experience in electricity auctions: Comparing outcomes from new and old energy auctions as well as the application of the hybrid Anglo-Dutch design," Energy Policy, Elsevier, vol. 55(C), pages 511-520.
    9. Severin Borenstein, 2012. "The Private and Public Economics of Renewable Electricity Generation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 67-92, Winter.
    10. Mastropietro, Paolo & Batlle, Carlos & Barroso, Luiz A. & Rodilla, Pablo, 2014. "Electricity auctions in South America: Towards convergence of system adequacy and RES-E support," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 375-385.
    11. Newbery, David, 2018. "Evaluating the case for supporting renewable electricity," Energy Policy, Elsevier, vol. 120(C), pages 684-696.
    12. Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer, 2016. "Why Wind Is Not Coal: On the Economics of Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    13. Stoft, Steven & Kahn, Edward P, 1991. "Auction Markets for Dispatchable Power: How to Score the Bids," Journal of Regulatory Economics, Springer, vol. 3(3), pages 275-286, September.
    14. 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.
    15. Richard Schmalensee, 2016. "The Performance of U.S. Wind and Solar Generators," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    16. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    17. 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.
    18. Lamont, Alan D., 2008. "Assessing the long-term system value of intermittent electric generation technologies," Energy Economics, Elsevier, vol. 30(3), pages 1208-1231, May.
    19. 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.
    20. Shimon Awerbuch, 2006. "Portfolio-Based Electricity Generation Planning: Policy Implications For Renewables And Energy Security," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 693-710, May.
    21. Pinto, Cláudio P. & Walter, Arnaldo, 2011. "The potential contribution of thermo power plants in the Brazilian electric sector," Energy, Elsevier, vol. 36(6), pages 3667-3674.
    22. Ignacio J. Perez-Arriaga & Carlos Batlle, 2012. "Impacts of Intermittent Renewables on Electricity Generation System Operation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    23. Edenhofer, Ottmar & Hirth, Lion & Knopf, Brigitte & Pahle, Michael & Schlömer, Steffen & Schmid, Eva & Ueckerdt, Falko, 2013. "On the economics of renewable energy sources," Energy Economics, Elsevier, vol. 40(S1), pages 12-23.
    24. Ingeborg Graabak & Stefan Jaehnert & Magnus Korpås & Birger Mo, 2017. "Norway as a Battery for the Future European Power System—Impacts on the Hydropower System," Energies, MDPI, vol. 10(12), pages 1-25, December.
    25. Luiz T. A. Maurer & Luiz A. Barroso, 2011. "Electricity Auctions : An Overview of Efficient Practices," World Bank Publications - Books, The World Bank Group, number 2346, December.
    26. Grubb, M. J., 1991. "The integration of renewable electricity sources," Energy Policy, Elsevier, vol. 19(7), pages 670-688, September.
    27. Hirth, Lion, 2016. "The benefits of flexibility: The value of wind energy with hydropower," Applied Energy, Elsevier, vol. 181(C), pages 210-223.
    28. Belanger, Camille & Gagnon, Luc, 2002. "Adding wind energy to hydropower," Energy Policy, Elsevier, vol. 30(14), pages 1279-1284, November.
    29. 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.
    30. Rego, Erik Eduardo & de Oliveira Ribeiro, Celma & do Valle Costa, Oswaldo Luiz & Ho, Linda Lee, 2017. "Thermoelectric dispatch: From utopian planning to reality," Energy Policy, Elsevier, vol. 106(C), pages 266-277.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Helena Martín & Sergio Coronas & Àlex Alonso & Jordi de la Hoz & José Matas, 2020. "Renewable Energy Auction Prices: Near Subsidy-Free?," Energies, MDPI, vol. 13(13), pages 1-21, July.
    2. Nariê Rinke Dias de Souza & Alexandre Souza & Mateus Ferreira Chagas & Thayse Aparecida Dourado Hernandes & Otávio Cavalett, 2022. "Addressing the contributions of electricity from biomass in Brazil in the context of the Sustainable Development Goals using life cycle assessment methods," Journal of Industrial Ecology, Yale University, vol. 26(3), pages 980-995, June.
    3. Diogo Lisbona Romeiro & Livia Amorim, 2022. "Waves of regulatory reforms and winds of uncertainties in the Brazilian natural gas industry," Competition and Regulation in Network Industries, , vol. 23(2), pages 153-179, June.
    4. Jamali, Mohammad-Bagher & Rasti-Barzoki, Morteza & Khosroshahi, Hossein & Altmann, Jörn, 2022. "An evolutionary game-theoretic approach to study the technological transformation of the industrial sector toward renewable electricity procurement: A case study of Iran," Applied Energy, Elsevier, vol. 318(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ruhnau, Oliver, 2022. "How flexible electricity demand stabilizes wind and solar market values: The case of hydrogen electrolyzers," Applied Energy, Elsevier, vol. 307(C).
    2. Zerrahn, Alexander, 2017. "Wind Power and Externalities," Ecological Economics, Elsevier, vol. 141(C), pages 245-260.
    3. Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer, 2016. "Why Wind Is Not Coal: On the Economics of Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Hirth, Lion, 2016. "The benefits of flexibility: The value of wind energy with hydropower," Applied Energy, Elsevier, vol. 181(C), pages 210-223.
    5. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    6. Hirth, Lion & Ueckerdt, Falko & Edenhofer, Ottmar, 2015. "Integration costs revisited – An economic framework for wind and solar variability," Renewable Energy, Elsevier, vol. 74(C), pages 925-939.
    7. Bistline, John E., 2017. "Economic and technical challenges of flexible operations under large-scale variable renewable deployment," Energy Economics, Elsevier, vol. 64(C), pages 363-372.
    8. Klie, Leo & Madlener, Reinhard, 2022. "Optimal configuration and diversification of wind turbines: A hybrid approach to improve the penetration of wind power," Energy Economics, Elsevier, vol. 105(C).
    9. Ruhnau, Oliver & Hirth, Lion & Praktiknjo, Aaron, 2020. "Heating with wind: Economics of heat pumps and variable renewables," Energy Economics, Elsevier, vol. 92(C).
    10. Simshauser, Paul, 2019. "Missing money, missing policy and Resource Adequacy in Australia's National Electricity Market," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    11. Ruhnau, Oliver, 2020. "Market-based renewables: How flexible hydrogen electrolyzers stabilize wind and solar market values," EconStor Preprints 227075, ZBW - Leibniz Information Centre for Economics.
    12. López Prol, Javier & Steininger, Karl W. & Zilberman, David, 2020. "The cannibalization effect of wind and solar in the California wholesale electricity market," Energy Economics, Elsevier, vol. 85(C).
    13. Simshauser, Paul, 2018. "On intermittent renewable generation & the stability of Australia's National Electricity Market," Energy Economics, Elsevier, vol. 72(C), pages 1-19.
    14. Simshauser, Paul, 2018. "Garbage can theory and Australia's National Electricity Market: Decarbonisation in a hostile policy environment," Energy Policy, Elsevier, vol. 120(C), pages 697-713.
    15. Eising, Manuel & Hobbie, Hannes & Möst, Dominik, 2020. "Future wind and solar power market values in Germany — Evidence of spatial and technological dependencies?," Energy Economics, Elsevier, vol. 86(C).
    16. Edenhofer, Ottmar & Hirth, Lion & Knopf, Brigitte & Pahle, Michael & Schlömer, Steffen & Schmid, Eva & Ueckerdt, Falko, 2013. "On the economics of renewable energy sources," Energy Economics, Elsevier, vol. 40(S1), pages 12-23.
    17. Sascha Samadi, 2017. "The Social Costs of Electricity Generation—Categorising Different Types of Costs and Evaluating Their Respective Relevance," Energies, MDPI, vol. 10(3), pages 1-37, March.
    18. Merrick, James H., 2016. "On representation of temporal variability in electricity capacity planning models," Energy Economics, Elsevier, vol. 59(C), pages 261-274.
    19. Javier L'opez Prol & Wolf-Peter Schill, 2020. "The Economics of Variable Renewables and Electricity Storage," Papers 2012.15371, arXiv.org.
    20. Alexandra G. Papadopoulou & George Vasileiou & Alexandros Flamos, 2020. "A Comparison of Dispatchable RES Technoeconomics: Is There a Niche for Concentrated Solar Power?," Energies, MDPI, vol. 13(18), pages 1-22, September.

    Corrections

    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:eee:enepol:v:138:y:2020:i:c:s0301421520300094. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.