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Supporting the externality of intermittency in policies for renewable energy

Listed author(s):
  • Bunn, Derek W.
  • Muñoz, José I.
Registered author(s):

    We analyse the joint problem of supporting renewables and resource adequacy in a liberalised electricity market and present a detailed model-based comparison of two alternative policies. We undertake this in the context of the British market. We show how, ceteris paribus, the progressive replacement of coal with wind imposes extra costs of reserve and evaluate alternative way to meet this, whether through capacity payments funded by customers, or a reliability requirement on wind generators with capital cost or energy feed-in subsidies. We consider the reality of market concentration and the extent to which pragmatic regulation could allow prices to rise above marginal cost to reduce the extent of direct subsidies and complex market designs. We also evaluate the implied cost of carbon reduction in a progressive replacement of coal with wind, when the security is maintained by extra peaking gas. We find that support through capital allowances rather than the energy market is more efficient.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0301421515300446
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    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 88 (2016)
    Issue (Month): C ()
    Pages: 594-602

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    Handle: RePEc:eee:enepol:v:88:y:2016:i:c:p:594-602
    DOI: 10.1016/j.enpol.2015.07.036
    Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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    1. Foxon, Timothy J., 2013. "Transition pathways for a UK low carbon electricity future," Energy Policy, Elsevier, vol. 52(C), pages 10-24.
    2. Sinden, Graham, 2007. "Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand," Energy Policy, Elsevier, vol. 35(1), pages 112-127, January.
    3. Bunn, Derek & Yusupov, Tim, 2015. "The progressive inefficiency of replacing renewable obligation certificates with contracts-for-differences in the UK electricity market," Energy Policy, Elsevier, vol. 82(C), pages 298-309.
    4. Janne Kettunen, Derek W. Bunn and William Blyth & Derek W. Bunn & William Blyth, 2011. "Investment Propensities under Carbon Policy Uncertainty," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 77-118.
    5. ., 2014. "The French national innovation ecosystem," Chapters,in: Mapping National Innovation Ecosystems, chapter 6, pages 104-118 Edward Elgar Publishing.
    6. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
    7. Wang, Shujie & Yuan, Peng & Li, Dong & Jiao, Yuhe, 2011. "An overview of ocean renewable energy in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(1), pages 91-111, January.
    8. Hossain, Jami & Sinha, Vinay & Kishore, V.V.N., 2011. "A GIS based assessment of potential for windfarms in India," Renewable Energy, Elsevier, vol. 36(12), pages 3257-3267.
    9. Pablo-Romero, M.P. & Sánchez-Braza, A. & Pérez, M., 2013. "Incentives to promote solar thermal energy in Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 22(C), pages 198-208.
    10. José I. Muñoz & Derek W. Bunn, 2013. "Investment risk and return under renewable decarbonization of a power market," Climate Policy, Taylor & Francis Journals, vol. 13(sup01), pages 87-105, March.
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