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Separating electricity from gas prices through Green Power Pools: Design options and evolution

Author

Listed:
  • Michael Grubb

    (University College London, Institute of Sustainable Resources)

  • Paul Drummond

    (University College London, Institute of Sustainable Resource)

  • Serguey Maximov

    (University College London, Institute of Sustainable Resource)

Abstract

This paper develops a detailed proposal for an efficient way to channel the value of large-scale renewables, which have become much cheaper than gas-driven wholesale electricity prices, to consumers at 'cost-plus' prices. This would reduce the fiscal pressure on governments for market-wide subsidies and offer more stable support for consumers most in need. We detail how this 'green power pool' approach could interact with the wholesale market to ensure firm power, also bringing transparency to the cost of balancing the variable renewables output, and maintaining incentives for efficient supply and demand responses. We illustrate the approach with reference to the cost and volume trajectories of UK renewables backed by government CfDs, targeted initially to particular consumer groups, as a first step in a wider transition towards direct consumer access to cheap renewables.

Suggested Citation

  • Michael Grubb & Paul Drummond & Serguey Maximov, 2022. "Separating electricity from gas prices through Green Power Pools: Design options and evolution," Working Papers Series inetwp193, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp193
    DOI: 10.36687/inetwp193
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    File URL: https://doi.org/10.36687/inetwp193
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    Citations

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    Cited by:

    1. Hugo Algarvio, 2023. "The Economic Sustainability of Variable Renewable Energy Considering the Negotiation of Different Support Schemes," Sustainability, MDPI, vol. 15(5), pages 1-21, March.
    2. Hugo Algarvio & António Couto & Ana Estanqueiro, 2024. "RES.Trade: An Open-Access Simulator to Assess the Impact of Different Designs on Balancing Electricity Markets," Energies, MDPI, vol. 17(24), pages 1-18, December.
    3. Karsten Neuhoff & Fernanda Ballesteros & Mats Kröger & Jörn C. Richstein, 2023. "Contracting Matters: Hedging Producers and Consumers with a Renewable Energy Pool," Discussion Papers of DIW Berlin 2035, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Electricity market design; energy crisis; renewable energy; CfD; long-run contracts; energy transition; energy poverty;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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