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Power Markets in Transition: Decarbonization, Energy Efficiency, and Short-Term Demand Response

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  • Mathias Mier
  • Christoph Weissbart

Abstract

Energy efficiency and short-term demand response are key issues in the decarbonization of power markets. However, their interaction and combined impact on market prices as well as on the supply side, is yet to be understood. We develop a framework to implement investments in energy efficiency and short-term demand response in detailed partial equilibrium power market models. We quantify our results using the EU-REGEN model for the European power market and find that energy efficiency contributes, under a 80% emission reduction target, only 11% of carbon emission reductions. Intermittent renewable energies such as wind and solar power account for the major share of 53%. However, both energy efficiency and short-term demand response have their merits in reducing marginal abatement costs and additionally exhibit an subadditive effect, at least under a 80% climate policy.

Suggested Citation

  • Mathias Mier & Christoph Weissbart, 2019. "Power Markets in Transition: Decarbonization, Energy Efficiency, and Short-Term Demand Response," ifo Working Paper Series 284, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_284
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    References listed on IDEAS

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    Cited by:

    1. Suphi Sen & Marie-Theres von Schickfus, 2019. "Climate Policy, Stranded Assets, and Investors' Expectations," CESifo Working Paper Series 7945, CESifo Group Munich.
    2. 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.

    More about this item

    Keywords

    Energy efficiency; demand response; renewable energy; dispatchable; technologies; energy modeling; optimal dispatch; investment planning;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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