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Decentralized energy supply and electricity market structures

Author

Listed:
  • Christoph Weber

    (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)

  • Philip Vogel

Abstract

Small decentralized power generation units (DG) are politically promoted because of their potential to reduce GHG-emissions and the existing dependency on fossil fuels. A long term goal of this promotion should be the creation of a level playing field for DG and conventional power generation. Due to the impact of DG on the electricity grid infrastructure, future regulation should consider the costs and benefits of the integration of decentralized energy generation units. Without an adequate consideration, the overall costs of the electricity generation system will be unnecessarily high. The present paper analyses, based on detailed modelling of decentralized demand and supply as well as of the overall system, the marginal costs or savings resulting from decentralized production. Thereby particular focus is laid on taking adequately into account the stochasticity both of energy demand and energy supply. An efficient grid pricing system should then remunerate long-term grid cost savings to operators of decentralized energy production or/and charge long-term additional grid costs to these operators. With detailed models of decentralized demand and supply as well as the overall system, the marginal costs or savings resulting from decentralized production are determined and their dependency on characteristics of the grid and of the decentralized supply are discussed.

Suggested Citation

  • Christoph Weber & Philip Vogel, 2005. "Decentralized energy supply and electricity market structures," EWL Working Papers 0501, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Nov 2005.
    • Handle: RePEc:dui:wpaper:0501
    as

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    References listed on IDEAS

    as
    1. Joskow, Paul L., 2005. "Transmission policy in the United States," Utilities Policy, Elsevier, vol. 13(2), pages 95-115, June.
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    Cited by:

    1. Vogel, Philip, 2009. "Efficient investment signals for distributed generation," Energy Policy, Elsevier, vol. 37(9), pages 3665-3672, September.
    2. McKenna, Russell, 2018. "The double-edged sword of decentralized energy autonomy," Energy Policy, Elsevier, vol. 113(C), pages 747-750.

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    More about this item

    Keywords

    electricity markets; decentralized power production; demand side management;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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