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Carbon price instead of support schemes : Windpower investments by the electricity markets

Author

Listed:
  • Finon Dominique

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Tanguy Janssen
  • Marie Petitet

Abstract

In this paper we study the development of wind power by the electricity market without any usual support scheme which is aimed at subsidizing non mature renewables, with the sole incentive of a significant carbon price. Long term electricity market and investment decisions simulation by system dynamics modelling is used to trace the electricity generation mix evolution over a 20-year period in a pure thermal system. A range of stable carbon price, as a tax could be, is tested in order to determine the value above which wind power development by market forces becomes economically possible. Not only economic competitiveness in terms of cost price, but also profitability against traditional fossil fuel technologies are necessary for a market-driven development of wind power. Results stress that wind power is really profitable for investors only if the carbon price is very significantly higher than the price required for making wind power MWh's cost price competitive with CCGT and coal-fired plants on the simplistic basis of levelized costs. In this context, the market-driven development of wind power seems only possible if there is a strong commitment to climate policy, reflected by the preference for a stable and high carbon price rather than a fuzzy price of an emission trading scheme. Besides, results show that market-driven development of wind power would require a sky-rocketing carbon price if the initial technology mix includes a share of nuclear plants even with a moratorium on new nuclear development.

Suggested Citation

  • Finon Dominique & Tanguy Janssen & Marie Petitet, 2015. "Carbon price instead of support schemes : Windpower investments by the electricity markets," CIRED Working Papers hal-01108944, HAL.
  • Handle: RePEc:hal:ciredw:hal-01108944
    Note: View the original document on HAL open archive server: https://hal-enpc.archives-ouvertes.fr/hal-01108944
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    References listed on IDEAS

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    1. Klessmann, Corinna & Nabe, Christian & Burges, Karsten, 2008. "Pros and cons of exposing renewables to electricity market risks--A comparison of the market integration approaches in Germany, Spain, and the UK," Energy Policy, Elsevier, vol. 36(10), pages 3646-3661, October.
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    6. Jan Horst Keppler & Marco Cometto, 2013. "Short-term and Long-Term System Effects of Intermittent Renewables on Nuclear Energy and the Electricity Mix," Post-Print hal-01609455, HAL.
    7. Richard Green and Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
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    Cited by:

    1. Petitet, Marie & Finon, Dominique & Janssen, Tanguy, 2017. "Capacity adequacy in power markets facing energy transition: A comparison of scarcity pricing and capacity mechanism," Energy Policy, Elsevier, vol. 103(C), pages 30-46.
    2. Quentin Perrier, 2017. "The French nuclear bet," Policy Papers 2017.01, FAERE - French Association of Environmental and Resource Economists.
    3. Quentin Perrier, 2017. "The French nuclear bet," CIRED Working Papers halshs-01487296, HAL.
    4. Quentin Perrier, 2017. "The French Nuclear Bet," Working Papers 2017.18, Fondazione Eni Enrico Mattei.

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    JEL classification:

    • F0 - International Economics - - General

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