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Electricity Production with Intermittent Sources

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  • Ambec, Stefan
  • Crampes, Claude

Abstract

The paper analyzes the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first characterize the first-best dispatch and investment in the two types of energy. We put the accent on the availability of the intermittent source as a major parameter of optimal capacity investment. We then analyze decentralization through competitive market mechanisms. We show that decentralizing first best requires to price electricity contingently on wind or solar availability. By contrast, traditional meters impose a second-best uniform pricing, which distorts the optimal mix of energy sources. Decentralizing the either cross-subsidy from the intermittent source to the reliable source of energy or structural integration of the two types of technology.

Suggested Citation

  • Ambec, Stefan & Crampes, Claude, 2010. "Electricity Production with Intermittent Sources," IDEI Working Papers 608, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:22694
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    References listed on IDEAS

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    1. Neuhoff, Karsten & Ehrenmann, Andreas & Butler, Lucy & Cust, Jim & Hoexter, Harriet & Keats, Kim & Kreczko, Adam & Sinden, Graham, 2008. "Space and time: Wind in an investment planning model," Energy Economics, Elsevier, vol. 30(4), pages 1990-2008, July.
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    5. Stefan Ambec & Joseph A. Doucet, 2003. "Decentralizing hydro power production," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(3), pages 587-607, August.
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    Cited by:

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    2. Wenbin Wang & Mark E. Ferguson & Shanshan Hu & Gilvan C. Souza, 2013. "Dynamic Capacity Investment with Two Competing Technologies," Manufacturing & Service Operations Management, INFORMS, vol. 15(4), pages 616-629, October.
    3. Saed Alizamir & Francis de Véricourt & Peng Sun, 2016. "Efficient Feed-In-Tariff Policies for Renewable Energy Technologies," Operations Research, INFORMS, vol. 64(1), pages 52-66, February.
    4. Lise, Wietze & van der Laan, Jeroen & Nieuwenhout, Frans & Rademaekers, Koen, 2013. "Assessment of the required share for a stable EU electricity supply until 2050," Energy Policy, Elsevier, vol. 59(C), pages 904-913.

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    More about this item

    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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