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Contracting for wind generation

Author

Listed:
  • David Newbery

    (Electricity Policy Research Group, University of Cambridge)

Abstract

The UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) or a premium FiT (pFiT) for all generation regardless of type. I argue that neither is suitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £70 million/yr by 2020, while the cost of the increased risk incurred by a pFiT might add another £180 m/yr. If similar savings were made to projected off-shore wind investments the savings might be three times as high.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Newbery, 2011. "Contracting for wind generation," Working Papers EPRG 1120, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1120
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    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp1120.pdf
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    Citations

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    Cited by:

    1. G. Cornelis van Kooten, 2015. "All you want to know about the Economics of Wind Power," Working Papers 2015-07, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    2. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    3. Paul Lehmann & Felix Creutzig & Melf-Hinrich Ehlers & Nele Friedrichsen & Clemens Heuson & Lion Hirth & Robert Pietzcker, 2012. "Carbon Lock-Out: Advancing Renewable Energy Policy in Europe," Energies, MDPI, vol. 5(2), pages 1-32, February.
    4. Higgins, P. & Foley, A.M. & Douglas, R. & Li, K., 2014. "Impact of offshore wind power forecast error in a carbon constraint electricity market," Energy, Elsevier, vol. 76(C), pages 187-197.
    5. Claire M. Weiller & Michael G. Pollitt, 2013. "Platform markets and energy services," Working Papers EPRG 1334, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Zapata, Sebastian & Castaneda, Monica & Franco, Carlos Jaime & Dyner, Isaac, 2019. "Clean and secure power supply: A system dynamics based appraisal," Energy Policy, Elsevier, vol. 131(C), pages 9-21.
    7. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
    8. Newbery, David, 2016. "Missing money and missing markets: Reliability, capacity auctions and interconnectors," Energy Policy, Elsevier, vol. 94(C), pages 401-410.
    9. Michael G. Pollitt & Lewis Dale, 2018. "Restructuring the Chinese Electricity Supply Sector – How industrial electricity prices are determined in a liberalized power market: lessons from Great Britain," Working Papers EPRG 1839, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    10. David M. Newbery, 2012. "Reforming Competitive Electricity Markets to Meet Environmental Targets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    11. Finn Roar Aune and Rolf Golombek, 2021. "Are Carbon Prices Redundant in the 2030 EU Climate and Energy Policy Package?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 225-264.
    12. David M. Newbery, 2012. "Contracting for Wind Generation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    13. Toke, David, 2011. "UK Electricity Market Reform—revolution or much ado about nothing?," Energy Policy, Elsevier, vol. 39(12), pages 7609-7611.
    14. Richter, Laura-Lucia & Pollitt, Michael G., 2018. "Which smart electricity service contracts will consumers accept? The demand for compensation in a platform market," Energy Economics, Elsevier, vol. 72(C), pages 436-450.
    15. Balta-Ozkan, Nazmiye & Yildirim, Julide & Connor, Peter M., 2015. "Regional distribution of photovoltaic deployment in the UK and its determinants: A spatial econometric approach," Energy Economics, Elsevier, vol. 51(C), pages 417-429.

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    Keywords

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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