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Electricity Provision with Intermittent Sources of Energy

Author

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  • Stefan Ambec

    (LERNA - Economie des Ressources Naturelles - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives, IDEI - Institut d'Economie Industrielle - UT1 - Université Toulouse 1 Capitole, Göteborg University)

  • Claude Crampes

    (GREMAQ - Groupe de recherche en économie mathématique et quantitative - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - UT1 - Université Toulouse 1 Capitole, IDEI - Institut d'Economie Industrielle - UT1 - Université Toulouse 1 Capitole)

Abstract

We analyze the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first characterize the optimal energy mix, emphasizing the availability of the intermittent source as a major parameter for the optimal investment in capacity. We then analyze decentralization through competitive market mechanisms. We show that decentralizing the efficient energy mix requires electricity to be priced contingently on the availability of the intermittent source. By contrast, traditional meters impose uniform pricing, which distorts the optimal mix of energy sources. Decentralizing the efficient energy mix with uniform prices requires either cross-subsidies from the intermittent source to the reliable source of energy or structural integration of the two types of technology.

Suggested Citation

  • Stefan Ambec & Claude Crampes, 2012. "Electricity Provision with Intermittent Sources of Energy," Post-Print hal-02118109, HAL.
  • Handle: RePEc:hal:journl:hal-02118109
    DOI: 10.1016/j.reseneeco.2012.01.001
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02118109
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    wind electricity; renewable resource; solar energy; global warming; renewable energy; solar power; énergie renouvelable; énergie solaire;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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