IDEAS home Printed from https://ideas.repec.org/p/ris/ewikln/2020_006.html
   My bibliography  Save this paper

One price fits all? Wind power expansion under uniform and nodal pricing in Germany

Author

Listed:
  • Schmidt, Lukas

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Zinke, Jonas

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

This paper evaluates investment incentives for wind power under uniform and nodal pricing. An electricity system model is developed, which allows for investments into wind power while considering transmission grid constraints in detail. Targeting equally high wind capacities under nodal and uniform pricing until 2030, locations of new wind power plants shift towards sites with lower wind yield under nodal prices. The wind energy fed into the grid, though, is higher under nodal pricing since curtailment is cut to a third. Grid-optimal wind locations require higher subsidy payments but decrease yearly variable supply costs by 1.5% in 2030. However, distributional effects are an obstacle to implementing nodal pricing, where about 75% of German demand faces electricity costs increase of about 5%. For mitigating distorted investment signals of uniform pricing, implementing investment restrictions within grid expansion areas prove to be more promising than a latitude-dependent generator-component in the grid tariff design.

Suggested Citation

  • Schmidt, Lukas & Zinke, Jonas, 2020. "One price fits all? Wind power expansion under uniform and nodal pricing in Germany," EWI Working Papers 2020-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2020_006
    as

    Download full text from publisher

    File URL: https://www.ewi.uni-koeln.de/cms/wp-content/uploads/2020/11/EWI_WP_20-06_One_price_fits-all_Wind_power_expansion_under_uniformnodal_pricing_in_Germany_Schmidt_Zinke.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johannes Wagner, 2019. "Grid Investment and Support Schemes for Renewable Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Pechan, A., 2017. "Where do all the windmills go? Influence of the institutional setting on the spatial distribution of renewable energy installation," Energy Economics, Elsevier, vol. 65(C), pages 75-86.
    3. Peter, Jakob, 2019. "How does climate change affect electricity system planning and optimal allocation of variable renewable energy?," Applied Energy, Elsevier, vol. 252(C), pages 1-1.
    4. Obermüller, Frank, 2017. "Build Wind Capacities at Windy Locations? Assessment of System Optimal Wind Locations," EWI Working Papers 2017-9, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    5. Peter, Jakob, 2019. "How Does Climate Change Affect Optimal Allocation of Variable Renewable Energy?," EWI Working Papers 2019-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    6. Ruderer, Dominik & Zöttl, Gregor, 2018. "Transmission pricing and investment incentives," Utilities Policy, Elsevier, vol. 55(C), pages 14-30.
    7. Richter, Jan, 2011. "DIMENSION - A Dispatch and Investment Model for European Electricity Markets," EWI Working Papers 2011-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    8. López Prol, Javier & Steininger, Karl W. & Zilberman, David, 2020. "The cannibalization effect of wind and solar in the California wholesale electricity market," Energy Economics, Elsevier, vol. 85(C).
    9. Staffell, Iain & Pfenninger, Stefan, 2016. "Using bias-corrected reanalysis to simulate current and future wind power output," Energy, Elsevier, vol. 114(C), pages 1224-1239.
    10. Wagner, Johannes, 2016. "Grid Investment and Support Schemes for Renewable Electricity Generation," EWI Working Papers 2016-8, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 10 Aug 2017.
    11. Schmidt, J. & Lehecka, G. & Gass, V. & Schmid, E., 2013. "Where the wind blows: Assessing the effect of fixed and premium based feed-in tariffs on the spatial diversification of wind turbines," Energy Economics, Elsevier, vol. 40(C), pages 269-276.
    12. Pfenninger, Stefan & Staffell, Iain, 2016. "Long-term patterns of European PV output using 30 years of validated hourly reanalysis and satellite data," Energy, Elsevier, vol. 114(C), pages 1251-1265.
    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. Eicke, Anselm & Schittekatte, Tim, 2022. "Fighting the wrong battle? A critical assessment of arguments against nodal electricity prices in the European debate," Energy Policy, Elsevier, vol. 170(C).
    2. Klie, Leo & Madlener, Reinhard, 2024. "Concentration versus diversification: A spatial deployment approach to improve the economics of wind power," Energy Policy, Elsevier, vol. 185(C).
    3. Lundin, Erik, 2022. "Geographic price granularity and investments in wind power: Evidence from a Swedish electricity market splitting reform," Energy Economics, Elsevier, vol. 113(C).
    4. vom Scheidt, Frederik & Qu, Jingyi & Staudt, Philipp & Mallapragada, Dharik S. & Weinhardt, Christof, 2022. "Integrating hydrogen in single-price electricity systems: The effects of spatial economic signals," Energy Policy, Elsevier, vol. 161(C).
    5. Martin Bichler & Hans Ulrich Buhl & Johannes Knörr & Felipe Maldonado & Paul Schott & Stefan Waldherr & Martin Weibelzahl, 2022. "Electricity Markets in a Time of Change: A Call to Arms for Business Research," Schmalenbach Journal of Business Research, Springer, vol. 74(1), pages 77-102, March.

    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. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Meus, Jelle & De Vits, Sarah & S'heeren, Nele & Delarue, Erik & Proost, Stef, 2021. "Renewable electricity support in perfect markets: Economic incentives under diverse subsidy instruments," Energy Economics, Elsevier, vol. 94(C).
    3. Simshauser, P., 2021. "Renewable Energy Zones in Australia’s National Electricity Market," Cambridge Working Papers in Economics 2119, Faculty of Economics, University of Cambridge.
    4. Simshauser, Paul, 2021. "Renewable Energy Zones in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 101(C).
    5. Gabrielli, Paolo & Aboutalebi, Reyhaneh & Sansavini, Giovanni, 2022. "Mitigating financial risk of corporate power purchase agreements via portfolio optimization," Energy Economics, Elsevier, vol. 109(C).
    6. Simshauser, Paul & Billimoria, Farhad & Rogers, Craig, 2022. "Optimising VRE capacity in Renewable Energy Zones," Energy Economics, Elsevier, vol. 113(C).
    7. Laha, Priyanka & Chakraborty, Basab, 2021. "Cost optimal combinations of storage technologies for maximizing renewable integration in Indian power system by 2040: Multi-region approach," Renewable Energy, Elsevier, vol. 179(C), pages 233-247.
    8. Grimm, Veronika & Sölch, Christian & Zöttl, Gregor, 2022. "Emissions reduction in a second-best world: On the long-term effects of overlapping regulations," Energy Economics, Elsevier, vol. 109(C).
    9. Eising, Manuel & Hobbie, Hannes & Möst, Dominik, 2020. "Future wind and solar power market values in Germany — Evidence of spatial and technological dependencies?," Energy Economics, Elsevier, vol. 86(C).
    10. Fortes, Patrícia & Simoes, Sofia G. & Amorim, Filipa & Siggini, Gildas & Sessa, Valentina & Saint-Drenan, Yves-Marie & Carvalho, Sílvia & Mujtaba, Babar & Diogo, Paulo & Assoumou, Edi, 2022. "How sensitive is a carbon-neutral power sector to climate change? The interplay between hydro, solar and wind for Portugal," Energy, Elsevier, vol. 239(PB).
    11. Engelhorn, Thorsten & Müsgens, Felix, 2021. "Why is Germany’s energy transition so expensive? Quantifying the costs of wind-energy decentralisation," Resource and Energy Economics, Elsevier, vol. 65(C).
    12. Russell McKenna & Stefan Pfenninger & Heidi Heinrichs & Johannes Schmidt & Iain Staffell & Katharina Gruber & Andrea N. Hahmann & Malte Jansen & Michael Klingler & Natascha Landwehr & Xiaoli Guo Lars', 2021. "Reviewing methods and assumptions for high-resolution large-scale onshore wind energy potential assessments," Papers 2103.09781, arXiv.org.
    13. Lukas Schmidt & Jonas Zinke, 2023. "One Price Fits All? On Inefficient Siting Incentives for Wind Power Expansion in Germany under Uniform Pricing," The Energy Journal, , vol. 44(4), pages 21-52, July.
    14. McKenna, Russell & Pfenninger, Stefan & Heinrichs, Heidi & Schmidt, Johannes & Staffell, Iain & Bauer, Christian & Gruber, Katharina & Hahmann, Andrea N. & Jansen, Malte & Klingler, Michael & Landwehr, 2022. "High-resolution large-scale onshore wind energy assessments: A review of potential definitions, methodologies and future research needs," Renewable Energy, Elsevier, vol. 182(C), pages 659-684.
    15. Clemens Gerbaulet & Casimir Lorenz, 2017. "dynELMOD: A Dynamic Investment and Dispatch Model for the Future European Electricity Market," Data Documentation 88, DIW Berlin, German Institute for Economic Research.
    16. de Guibert, Paul & Shirizadeh, Behrang & Quirion, Philippe, 2020. "Variable time-step: A method for improving computational tractability for energy system models with long-term storage," Energy, Elsevier, vol. 213(C).
    17. Marko Hočevar & Lovrenc Novak & Primož Drešar & Gašper Rak, 2022. "The Status Quo and Future of Hydropower in Slovenia," Energies, MDPI, vol. 15(19), pages 1-13, September.
    18. Lukas Kriechbaum & Philipp Gradl & Romeo Reichenhauser & Thomas Kienberger, 2020. "Modelling Grid Constraints in a Multi-Energy Municipal Energy System Using Cumulative Exergy Consumption Minimisation," Energies, MDPI, vol. 13(15), pages 1-23, July.
    19. Behrang Shirizadeh, Quentin Perrier, and Philippe Quirion, 2022. "How Sensitive are Optimal Fully Renewable Power Systems to Technology Cost Uncertainty?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    20. Omoyele, Olalekan & Hoffmann, Maximilian & Koivisto, Matti & Larrañeta, Miguel & Weinand, Jann Michael & Linßen, Jochen & Stolten, Detlef, 2024. "Increasing the resolution of solar and wind time series for energy system modeling: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 189(PB).

    More about this item

    Keywords

    Nodal Pricing; Market Design; Energy System Modeling; Renewable Energies; Market Values;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:ris:ewikln:2020_006. 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: Sabine Williams (email available below). General contact details of provider: https://edirc.repec.org/data/ewikode.html .

    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.