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Curtailment of renewable generation: Economic optimality and incentives

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  • Klinge Jacobsen, Henrik
  • Schröder, Sascha Thorsten

Abstract

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.

Suggested Citation

  • 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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    Citations

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    Cited by:

    1. 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.
    2. repec:eee:rensus:v:75:y:2017:i:c:p:989-1007 is not listed on IDEAS
    3. repec:gam:jeners:v:11:y:2018:i:1:p:121-:d:125353 is not listed on IDEAS
    4. 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.
    5. 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.
    6. 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.
    7. repec:eee:eneeco:v:65:y:2017:i:c:p:458-470 is not listed on IDEAS
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. Anne Held & Tobias Boßmann & Mario Ragwitz & Pablo del Río & Luis Janeiro & Sonja Förster, 2017. "Challenges and appropriate policy portfolios for (almost) mature renewable electricity technologies," Energy & Environment, , vol. 28(1-2), pages 34-53, March.
    14. repec:eee:renene:v:113:y:2017:i:c:p:1580-1588 is not listed on IDEAS
    15. 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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