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Institutions and Electricity Systems Transition towards Decarbonisation : The hidden change of the market regime

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  • Dominique Finon

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Apart from the UK where it has been widely discussed in the 2011 Electricity Market Reform, energy experts communities are still unaware of the impacts that carbon policies directly focused on the development of low carbon technologies produce on the electricity market regime. Public co-ordination with long term arrangements needs to be introduced as a substitute to long term co-ordination by the market. Indeed, the current market co-ordination makes carbon prices ineffective at orienting investors towards low carbon technologies : fossil fuel generation technologies are preferred because their investment risks are much lower in the market regime. So, in order to avoid delayed investment aiming at the decarbonisation of electricity systems, a number of new market arrangements which lower the investment risk of these technologies are being selected by governments. But, as these low carbon equipments develop, long term co-ordination by the market for the other technologies (peaking units, CCGT) will fade away. That means that in the future, public co-ordination and planning will completely replace market players' decisions, not only for low carbon technologies, but for every capacity development.

Suggested Citation

  • Dominique Finon, 2012. "Institutions and Electricity Systems Transition towards Decarbonisation : The hidden change of the market regime," CIRED Working Papers hal-00866417, HAL.
    • Handle: RePEc:hal:ciredw:hal-00866417
    Note: View the original document on HAL open archive server: https://hal.science/hal-00866417
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    References listed on IDEAS

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    Cited by:

    1. Michel Damian, 2012. "Repenser l'économie du changement climatique," Post-Print halshs-00709929, HAL.

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