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Equilibrium supply security in a multinational electricity market with renewable production

Author

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  • Thomas P. Tangerås

    (Research Institute of Industrial Economics (IFN), Stockholm, Sweden and Energy Policy Research Group (EPRG), University of Cambridge)

Abstract

An increasing reliance on variable renewable energy has raised concern about system ability to continuously satisfy electricity demand. This paper examines countries' unilateral incentives to achieve supply security through capacity reserves and market integration in a multinational electricity market. Capacity reserves protect consumers against blackouts and extreme prices, but distort the market. Market integration reduces supply imbalances, but requires network investment. Equilibrium capacity reserves can be too high or low, but network investment is always insufficient relative to the total welfare maximizing level. Capacity reserves are smaller when there are financial markets or when aimed at solving domestic supply constraints.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Thomas P. Tangerås, 2017. "Equilibrium supply security in a multinational electricity market with renewable production," Working Papers EPRG 1707, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1707
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    Cited by:

    1. is not listed on IDEAS
    2. Bastos, João Pedro & Cunha, Gabriel & Barroso, Luiz Augusto & Aquino, Thereza, 2018. "Reliability mechanism design: An economic approach to enhance adequate remuneration and enable efficient expansion," Energy, Elsevier, vol. 158(C), pages 1150-1159.
    3. Par Holmberg & Robert A. Ritz, 2019. "Capacity mechanisms and the technology mix in competitive electricity markets," Working Papers EPRG1921, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Zhenyu Zhao & Huijia Yang, 2020. "Regional Security Assessment of Integrated Energy Systems with Renewables in China: A Grid-Connected Perspective," Sustainability, MDPI, vol. 12(24), pages 1-18, December.
    5. Persson, Lars & Tangerås, Thomas, 2018. "Transmission Network Investment across National Borders: The Liberalized Nordic Electricity Market," Working Paper Series 1242, Research Institute of Industrial Economics.

    More about this item

    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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