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Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany

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This paper provides an approach to incorporate planned investments in power grid infrastructure in Germany, which intend to provide the necessary flexibility to integrate large shares of variable renewable energy sources into the power system, into a dynamic stochastic equilibrium model. Since the investments’ economic impact remains unclear, this paper sheds light on two questions: Do power grid infrastructure investments in Germany have the potential to positively impact economic performance, particularly GDP and employment? Is power grid infrastructure investment an efficient way to provide flexibility to the electricity system? We find the potential for negative effects of power grid infrastructure investments on economic outcomes, which can, however, be mitigated by an adequate design of the investments and its framework conditions.

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  • Schreiner, Lena & Madlener, Reinhard, 2019. "Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany," FCN Working Papers 11/2019, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised 01 Apr 2020.
  • Handle: RePEc:ris:fcnwpa:2019_011
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    More about this item

    Keywords

    DSGE analysis; infrastructure; Germany; electric grid; energy transition; flexibility;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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