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Concentration Versus Diversification: A Spatial Deployment Approach to Improve the Economics of Wind Power

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Previous studies on the economics of onshore wind parks in Germany found that geographic diversifi-cation results in no significant system costs savings. Furthermore, such diversification does not neces-sarily result in higher market values (Eising et al., 2020) or better merchant profitability (Klie and Madlener, 2020). Therefore, the question arises whether an alternative allocation (i.e. a concentration) rather than diversification of the German wind park fleet is more economical. In this paper, we compare the future (2030) market values, subsidy needs and total system costs of a more concentrated versus a more diversified allocation of onshore wind turbines in Germany. The results show that a concentration of turbines, in areas where the gap between market values and levelized costs of electricity is smallest (i.e. in the North of Germany), is more beneficial in terms of subsidy need and system costs. The analysis further shows that these areas are also more beneficial in terms of market values, when using system-friendly turbine configurations selected based on the same approach. To incentivize such a selection of areas and turbine configurations based on minimal gaps between market values and levelized costs an alternative renewables support scheme is presented, which favors such minimal gaps in its auctioning process.

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  • Klie, Leo & Madlener, Reinhard, 2020. "Concentration Versus Diversification: A Spatial Deployment Approach to Improve the Economics of Wind Power," FCN Working Papers 2/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised May 2021.
    • Handle: RePEc:ris:fcnwpa:2020_002
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    More about this item

    Keywords

    market value; market penetration; spatial concentration; spatial diversification; renewable energy support scheme; onshore wind; Germany;
    All these keywords.

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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