IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v88y2016icp594-602.html
   My bibliography  Save this article

Supporting the externality of intermittency in policies for renewable energy

Author

Listed:
  • Bunn, Derek W.
  • Muñoz, José I.

Abstract

We analyse the joint problem of supporting renewables and resource adequacy in a liberalised electricity market and present a detailed model-based comparison of two alternative policies. We undertake this in the context of the British market. We show how, ceteris paribus, the progressive replacement of coal with wind imposes extra costs of reserve and evaluate alternative way to meet this, whether through capacity payments funded by customers, or a reliability requirement on wind generators with capital cost or energy feed-in subsidies. We consider the reality of market concentration and the extent to which pragmatic regulation could allow prices to rise above marginal cost to reduce the extent of direct subsidies and complex market designs. We also evaluate the implied cost of carbon reduction in a progressive replacement of coal with wind, when the security is maintained by extra peaking gas. We find that support through capital allowances rather than the energy market is more efficient.

Suggested Citation

  • Bunn, Derek W. & Muñoz, José I., 2016. "Supporting the externality of intermittency in policies for renewable energy," Energy Policy, Elsevier, vol. 88(C), pages 594-602.
    • Handle: RePEc:eee:enepol:v:88:y:2016:i:c:p:594-602
    DOI: 10.1016/j.enpol.2015.07.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421515300446
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2015.07.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Foxon, Timothy J., 2013. "Transition pathways for a UK low carbon electricity future," Energy Policy, Elsevier, vol. 52(C), pages 10-24.
    2. Sinden, Graham, 2007. "Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand," Energy Policy, Elsevier, vol. 35(1), pages 112-127, January.
    3. Bunn, Derek & Yusupov, Tim, 2015. "The progressive inefficiency of replacing renewable obligation certificates with contracts-for-differences in the UK electricity market," Energy Policy, Elsevier, vol. 82(C), pages 298-309.
    4. Janne Kettunen, Derek W. Bunn and William Blyth & Derek W. Bunn & William Blyth, 2011. "Investment Propensities under Carbon Policy Uncertainty," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 77-118.
    5. ., 2014. "The French national innovation ecosystem," Chapters, in: Mapping National Innovation Ecosystems, chapter 6, pages 104-118, Edward Elgar Publishing.
    6. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
    7. Wang, Shujie & Yuan, Peng & Li, Dong & Jiao, Yuhe, 2011. "An overview of ocean renewable energy in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(1), pages 91-111, January.
    8. Hossain, Jami & Sinha, Vinay & Kishore, V.V.N., 2011. "A GIS based assessment of potential for windfarms in India," Renewable Energy, Elsevier, vol. 36(12), pages 3257-3267.
    9. Pablo-Romero, M.P. & Sánchez-Braza, A. & Pérez, M., 2013. "Incentives to promote solar thermal energy in Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 22(C), pages 198-208.
    10. Jos� I. Mu�oz & Derek W. Bunn, 2013. "Investment risk and return under renewable decarbonization of a power market," Climate Policy, Taylor & Francis Journals, vol. 13(sup01), pages 87-105, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Balint, T. & Lamperti, F. & Mandel, A. & Napoletano, M. & Roventini, A. & Sapio, A., 2017. "Complexity and the Economics of Climate Change: A Survey and a Look Forward," Ecological Economics, Elsevier, vol. 138(C), pages 252-265.
    2. repec:hal:spmain:info:hdl:2441/5qr7f0k4sk8rbq4do5u6v70rm0 is not listed on IDEAS
    3. Hu, Jing & Harmsen, Robert & Crijns-Graus, Wina & Worrell, Ernst & van den Broek, Machteld, 2018. "Identifying barriers to large-scale integration of variable renewable electricity into the electricity market: A literature review of market design," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2181-2195.
    4. Märkle-Huß, Joscha & Feuerriegel, Stefan & Neumann, Dirk, 2018. "Large-scale demand response and its implications for spot prices, load and policies: Insights from the German-Austrian electricity market," Applied Energy, Elsevier, vol. 210(C), pages 1290-1298.
    5. repec:hal:spmain:info:hdl:2441/1nlv566svi86iqtetenms15tc4 is not listed on IDEAS
    6. Bunn, Derek W. & Redondo-Martin, Jorge & Muñoz-Hernandez, José I. & Diaz-Cachinero, Pablo, 2019. "Analysis of coal conversion to biomass as a transitional technology," Renewable Energy, Elsevier, vol. 132(C), pages 752-760.
    7. repec:spo:wpmain:info:hdl:2441/5qr7f0k4sk8rbq4do5u6v70rm0 is not listed on IDEAS
    8. Nagy, Roel L.G. & Fleten, Stein-Erik & Sendstad, Lars H., 2023. "Don’t stop me now: Incremental capacity growth under subsidy termination risk," Energy Policy, Elsevier, vol. 172(C).
    9. Savelli, Iacopo & Hardy, Jeffrey & Hepburn, Cameron & Morstyn, Thomas, 2022. "Putting wind and solar in their place: Internalising congestion and other system-wide costs with enhanced contracts for difference in Great Britain," Energy Economics, Elsevier, vol. 113(C).
    10. Wiegner, J.F. & Andreasson, L.M. & Kusters, J.E.H. & Nienhuis, R.M., 2024. "Interdisciplinary perspectives on offshore energy system integration in the North Sea: A systematic literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 189(PA).
    11. Auke Hoekstra & Maarten Steinbuch & Geert Verbong, 2017. "Creating Agent-Based Energy Transition Management Models That Can Uncover Profitable Pathways to Climate Change Mitigation," Complexity, Hindawi, vol. 2017, pages 1-23, December.
    12. Märkle-Huß, Joscha & Feuerriegel, Stefan & Neumann, Dirk, 2018. "Contract durations in the electricity market: Causal impact of 15min trading on the EPEX SPOT market," Energy Economics, Elsevier, vol. 69(C), pages 367-378.
    13. repec:spo:wpmain:info:hdl:2441/1nlv566svi86iqtetenms15tc4 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. McInerney, Celine & Bunn, Derek W., 2017. "Optimal over installation of wind generation facilities," Energy Economics, Elsevier, vol. 61(C), pages 87-96.
    2. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Agent-based models and economic policy," Post-Print hal-03461120, HAL.
    3. Browne, Oliver & Poletti, Stephen & Young, David, 2015. "How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?," Energy Policy, Elsevier, vol. 87(C), pages 17-27.
    4. Li, Francis G.N. & Trutnevyte, Evelina & Strachan, Neil, 2015. "A review of socio-technical energy transition (STET) models," Technological Forecasting and Social Change, Elsevier, vol. 100(C), pages 290-305.
    5. Michail Chronopoulos, Verena Hagspiel, and Stein-Erik Fleten, 2016. "Stepwise Green Investment under Policy Uncertainty," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS
    7. Blyth, William & Bunn, Derek & Chronopoulos, Michail & Munoz, Jose, 2014. "Systematic Analysis of the Evolution of Electricity and Carbon Markets under Deep Decarbonisation," Discussion Papers 2014/39, Norwegian School of Economics, Department of Business and Management Science.
    8. Koppelaar, Rembrandt H.E.M. & Keirstead, James & Shah, Nilay & Woods, Jeremy, 2016. "A review of policy analysis purpose and capabilities of electricity system models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1531-1544.
    9. Bunn, Derek W. & Redondo-Martin, Jorge & Muñoz-Hernandez, José I. & Diaz-Cachinero, Pablo, 2019. "Analysis of coal conversion to biomass as a transitional technology," Renewable Energy, Elsevier, vol. 132(C), pages 752-760.
    10. Hdidouan, Daniel & Staffell, Iain, 2017. "The impact of climate change on the levelised cost of wind energy," Renewable Energy, Elsevier, vol. 101(C), pages 575-592.
    11. Staffell, Iain & Pfenninger, Stefan, 2018. "The increasing impact of weather on electricity supply and demand," Energy, Elsevier, vol. 145(C), pages 65-78.
    12. repec:hal:wpspec:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS
    13. Xiaoyang Sun & Baosheng Zhang & Xu Tang & Benjamin C. McLellan & Mikael Höök, 2016. "Sustainable Energy Transitions in China: Renewable Options and Impacts on the Electricity System," Energies, MDPI, vol. 9(12), pages 1-20, November.
    14. Tietjen, Oliver & Pahle, Michael & Fuss, Sabine, 2016. "Investment risks in power generation: A comparison of fossil fuel and renewable energy dominated markets," Energy Economics, Elsevier, vol. 58(C), pages 174-185.
    15. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS
    16. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS
    17. Balint, T. & Lamperti, F. & Mandel, A. & Napoletano, M. & Roventini, A. & Sapio, A., 2017. "Complexity and the Economics of Climate Change: A Survey and a Look Forward," Ecological Economics, Elsevier, vol. 138(C), pages 252-265.
    18. Newbery, David M. & Greve, Thomas, 2017. "The strategic robustness of oligopoly electricity market models," Energy Economics, Elsevier, vol. 68(C), pages 124-132.
    19. Xia, Junqiang & Falconer, Roger A. & Lin, Binliang & Tan, Guangming, 2012. "Estimation of annual energy output from a tidal barrage using two different methods," Applied Energy, Elsevier, vol. 93(C), pages 327-336.
    20. Simshauser, P., 2019. "On the impact of government-initiated CfD’s in Australia’s National Electricity Market," Cambridge Working Papers in Economics 1901, Faculty of Economics, University of Cambridge.
    21. Mahtta, Richa & Joshi, P.K. & Jindal, Alok Kumar, 2014. "Solar power potential mapping in India using remote sensing inputs and environmental parameters," Renewable Energy, Elsevier, vol. 71(C), pages 255-262.
    22. Brown, Marilyn A. & Gumerman, Etan & Sun, Xiaojing & Sercy, Kenneth & Kim, Gyungwon, 2012. "Myths and facts about electricity in the U.S. South," Energy Policy, Elsevier, vol. 40(C), pages 231-241.
    23. Liu, Liwei & Ye, Junhong & Zhao, Yufei & Zhao, Erdong, 2015. "The plight of the biomass power generation industry in China – A supply chain risk perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 680-692.
    24. Nelson, Tim & Pascoe, Owen & Calais, Prabpreet & Mitchell, Lily & McNeill, Judith, 2019. "Efficient integration of climate and energy policy in Australia’s National Electricity Market," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 178-193.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:88:y:2016:i:c:p:594-602. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.