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Do Intermittent Renewables Threaten the Electricity Supply Security?

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  • Liebensteiner, Mario
  • Wrienz, Matthias

Abstract

Around the globe, intermittent renewable energies in the form of wind and solar power are on the rise. Their subsidization can be seen as a market intervention, which may deter optimal investment. Thus, this study tests the effect of renewable energies on investment in conventional electricity generation technologies. We estimate a dynamic investment model for 14 European economies for the period 2004–2016 and find a non-negligible negative impact of intermittent renewables on investment in peak-load capacity (mainly gas), while base-load (particularly coal) plants are unaffected. However, the production flexibility of gas-fired plants represents a particularly vital function to balance the supply intermittency of wind and solar. Thus, dispatchable conventional power plants are still necessary to back the system under scarcity events, such as unfavorable weather conditions during high electricity demand. Policymakers should be aware of the adverse effects of RES on investment in peak-load plants and may consider a redesign of the current system, for example by introducing capacity markets.

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  • Liebensteiner, Mario & Wrienz, Matthias, 2020. "Do Intermittent Renewables Threaten the Electricity Supply Security?," Energy Economics, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:eneeco:v:87:y:2020:i:c:s0140988319302804
    DOI: 10.1016/j.eneco.2019.104499
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    More about this item

    Keywords

    Electricity Supply Security; Investment in Electricity Generation; Renewable Energy Sources;
    All these keywords.

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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