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Quantifying the Long‐Term Economic Benefits of European Electricity System Integration

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  • Schmid, Eva
  • Knopf, Brigitte

Abstract

This paper analyses a set of model‐based decarbonization scenarios in order to quantify the long‐term economic benefits that arise from an increasing integration of the pan‐European electricity system. It thereby focuses on the interplay between transmission infrastructure and renewable generation capacity expansion. We confirm earlier findings that, on aggregate, pan‐European transmission capacity expansion constitutes a no‐regret option for integrating increasing shares of variable renewables in mitigation scenarios with positive social returns on investment. However, it turns out that the change in total discounted system costs that occurs as transmission capacity expansion increases is modest in magnitude, with a maximum of 3.5% for a case with no expansion compared to one with massive expansion. In technical terms this means that the optimum is rather flat and that taking into account regional and local benefits and distributional aspects, could alter the evaluation of the economic benefits considerably. A crucial finding in this context is that the configuration of pan‐European transmission infrastructure and the importance of specific country‐connections, i.e. a “Southern” versus a “Northern” solution, crucially hinges on the relative development of specific investment costs for solar and wind technologies over the next decades.

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  • Schmid, Eva & Knopf, Brigitte, 2014. "Quantifying the Long‐Term Economic Benefits of European Electricity System Integration," Energy: Resources and Markets 163587, Fondazione Eni Enrico Mattei (FEEM).
  • Handle: RePEc:ags:feemer:163587
    DOI: 10.22004/ag.econ.163587
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    5. Krakowski, Vincent & Assoumou, Edi & Mazauric, Vincent & Maïzi, Nadia, 2016. "Reprint of Feasible path toward 40–100% renewable energy shares for power supply in France by 2050: A prospective analysis," Applied Energy, Elsevier, vol. 184(C), pages 1529-1550.
    6. Franziska Holz & Christian Von Hirschhausen, 2013. "The Infrastructure Implications Of The Energy Transformation In Europe Until 2050 — Lessons From The Emf28 Modeling Exercise," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-26.
    7. Reichenberg, Lina & Hedenus, Fredrik & Odenberger, Mikael & Johnsson, Filip, 2018. "The marginal system LCOE of variable renewables – Evaluating high penetration levels of wind and solar in Europe," Energy, Elsevier, vol. 152(C), pages 914-924.
    8. Reichenberg, Lina & Hedenus, Fredrik & Odenberger, Mikael & Johnsson, Filip, 2018. "Tailoring large-scale electricity production from variable renewable energy sources to accommodate baseload generation in europe," Renewable Energy, Elsevier, vol. 129(PA), pages 334-346.
    9. Karl-Kiên Cao & Johannes Metzdorf & Sinan Birbalta, 2018. "Incorporating Power Transmission Bottlenecks into Aggregated Energy System Models," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-32, June.
    10. Geoffrey J. Blanford & Christoph Weissbart, 2019. "A Framework for Modeling the Dynamics of Power Markets – The EU-REGEN Model," ifo Working Paper Series 307, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. Ringkjøb, Hans-Kristian & Haugan, Peter M. & Solbrekke, Ida Marie, 2018. "A review of modelling tools for energy and electricity systems with large shares of variable renewables," Renewable and Sustainable Energy Reviews, Elsevier, vol. 96(C), pages 440-459.
    12. Bauknecht, Dierk & Funcke, Simon & Vogel, Moritz, 2020. "Is small beautiful? A framework for assessing decentralised electricity systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 118(C).
    13. Lehmann, Paul & Ammermann, Kathrin & Gawel, Erik & Geiger, Charlotte & Hauck, Jennifer & Heilmann, Jörg & Meier, Jan-Niklas & Ponitka, Jens & Schicketanz, Sven & Stemmer, Boris & Tafarte, Philip & Thr, 2020. "Managing spatial sustainability trade-offs: The case of wind power," UFZ Discussion Papers 4/2020, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    14. Clemens Gerbaulet & Casimir Lorenz, 2017. "dynELMOD: A Dynamic Investment and Dispatch Model for the Future European Electricity Market," Data Documentation 88, DIW Berlin, German Institute for Economic Research.
    15. Knopf, Brigitte & Nahmmacher, Paul & Schmid, Eva, 2015. "The European renewable energy target for 2030 – An impact assessment of the electricity sector," Energy Policy, Elsevier, vol. 85(C), pages 50-60.
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    17. David Ritter & Roland Meyer & Matthias Koch & Markus Haller & Dierk Bauknecht & Christoph Heinemann, 2019. "Effects of a Delayed Expansion of Interconnector Capacities in a High RES-E European Electricity System," Energies, MDPI, Open Access Journal, vol. 12(16), pages 1-32, August.
    18. Gerbaulet, C. & von Hirschhausen, C. & Kemfert, C. & Lorenz, C. & Oei, P.-Y., 2019. "European electricity sector decarbonization under different levels of foresight," Renewable Energy, Elsevier, vol. 141(C), pages 973-987.
    19. Carfora, A. & Pansini, R.V. & Scandurra, G., 2021. "The role of environmental taxes and public policies in supporting RES investments in EU countries: Barriers and mimicking effects," Energy Policy, Elsevier, vol. 149(C).
    20. Martínez-Gordón, R. & Morales-España, G. & Sijm, J. & Faaij, A.P.C., 2021. "A review of the role of spatial resolution in energy systems modelling: Lessons learned and applicability to the North Sea region," Renewable and Sustainable Energy Reviews, Elsevier, vol. 141(C).
    21. Thomas Sattich & Inga Ydersbond & Daniel Scholten,, 2015. "Can EU’s Decarbonisation Agenda Break the State-Company Axis in the Power Sector?," Working Papers 2015.51, Fondazione Eni Enrico Mattei.
    22. Jing, Rui & Kuriyan, Kamal & Lin, Jian & Shah, Nilay & Zhao, Yingru, 2020. "Quantifying the contribution of individual technologies in integrated urban energy systems – A system value approach," Applied Energy, Elsevier, vol. 266(C).

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    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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