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Curtailment of renewable generation: Economic optimality and incentives


  • Klinge Jacobsen, Henrik
  • Schröder, Sascha Thorsten


The loss from curtailing generation based on renewable energy sources is generally seen as an unacceptable solution by the public. The main argument is that it is a loss of green energy and an economic loss to curtail generation with near zero marginal costs. However, this view could lead to overinvestment in grid infrastructure and underinvestment in renewable energy sources. This article argues that some curtailment of fluctuating (variable) generation is optimal. We address the possible contributions to total curtailment from involuntary and voluntary curtailment. The costs of curtailment in terms of lost generation are discussed based on market price and support levels including the rationale for compensating generators for losses. The extent of actual curtailment is illustrated by examples from different global markets. In general, both the value of the curtailed energy and the amount of curtailed energy relative to total fluctuating generation is low but rising. Single generators may be affected considerably if insufficient compensation measures are in place. In the future, optimal curtailment will increase along with an increased share of fluctuating renewable generation. Extending renewable generation comparatively cheaply can be achieved by the installation of additional capacity at offshore locations until optimal curtailment levels are reached.

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  • Klinge Jacobsen, Henrik & Schröder, Sascha Thorsten, 2012. "Curtailment of renewable generation: Economic optimality and incentives," Energy Policy, Elsevier, vol. 49(C), pages 663-675.
  • Handle: RePEc:eee:enepol:v:49:y:2012:i:c:p:663-675 DOI: 10.1016/j.enpol.2012.07.004

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    References listed on IDEAS

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    Cited by:

    1. Chaouachi, Aymen & Bompard, Ettore & Fulli, Gianluca & Masera, Marcelo & De Gennaro, Michele & Paffumi, Elena, 2016. "Assessment framework for EV and PV synergies in emerging distribution systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 719-728.
    2. Schill, Wolf-Peter, 2014. "Residual Load, Renewable Surplus Generation and Storage Requirements in Germany," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 65-79.
    3. Klinge Jacobsen, Henrik & Pade, Lise Lotte & Schröder, Sascha Thorsten & Kitzing, Lena, 2014. "Cooperation mechanisms to achieve EU renewable targets," Renewable Energy, Elsevier, vol. 63(C), pages 345-352.
    4. Kubik, M.L. & Coker, P.J. & Barlow, J.F., 2015. "Increasing thermal plant flexibility in a high renewables power system," Applied Energy, Elsevier, vol. 154(C), pages 102-111.
    5. Su, Yufei & Kern, Jordan D. & Characklis, Gregory W., 2017. "The impact of wind power growth and hydrological uncertainty on financial losses from oversupply events in hydropower-dominated systems," Applied Energy, Elsevier, vol. 194(C), pages 172-183.
    6. Ehrlich, Lars G. & Klamka, Jonas & Wolf, André, 2015. "The potential of decentralized power-to-heat as a flexibility option for the german electricity system: A microeconomic perspective," Energy Policy, Elsevier, vol. 87(C), pages 417-428.
    7. Kondziella, Hendrik & Bruckner, Thomas, 2016. "Flexibility requirements of renewable energy based electricity systems – a review of research results and methodologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 53(C), pages 10-22.
    8. Erik Gawel & Alexandra Purkus & Klaas Korte & Paul Lehmann, 2013. "Förderung der Markt- und Systemintegration erneuerbarer Energien: Perspektiven einer instrumentellen Weiterentwicklung," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 82(3), pages 123-136.
    9. Brijs, Tom & De Vos, Kristof & De Jonghe, Cedric & Belmans, Ronnie, 2015. "Statistical analysis of negative prices in European balancing markets," Renewable Energy, Elsevier, vol. 80(C), pages 53-60.
    10. Gawel, Erik & Purkus, Alexandra, 2013. "Promoting the market and system integration of renewable energies through premium schemes—A case study of the German market premium," Energy Policy, Elsevier, vol. 61(C), pages 599-609.


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