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Building Blocks: Investment in Renewable and Nonrenewable Technologies

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  • James Bushnell

Abstract

This paper examines how the increasing penetration of intermittent renewable generation can change the economic landscape for merchant power investment in conventional thermal generation. An equilibrium model of generation investment is developed, based on the long-standing principles of finding the optimal mix of capital intensive and higher marginal cost resources to serve a market with fluctuating demand. This model is then applied to data on electricity markets from several regions of the western United States to examine how the interaction of increasing wind capacity and electricity market design affects the equilibrium mix of thermal capacity and the revenues earned by renewable suppliers.

Suggested Citation

  • James Bushnell, 2011. "Building Blocks: Investment in Renewable and Nonrenewable Technologies," RSCAS Working Papers 2011/53, European University Institute.
    • Handle: RePEc:rsc:rsceui:2011/53
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    References listed on IDEAS

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    1. Cramton, Peter & Stoft, Steven, 2005. "A Capacity Market that Makes Sense," The Electricity Journal, Elsevier, vol. 18(7), pages 43-54.
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