Econonomics of Energy and Environmental Policy

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Irish and British electricity prices: what recent history implies for future prices

This paper compares retail and wholesale electricity prices in SEM, the market of the island of Ireland, and BETTA in Great Britain. Estimated wholesale costs are much lower in BETTA. We show that this is mostly because the wholesale price in BETTA is set too low to cover generation costs, although it is compensated by large retail margins. The need for substantial new investment in generation in Great Britain suggests that returns to generators will have to increase. This should be accompanied by a decrease in retail margins to avoid overburdening final consumers. Renewable support in Great Britain appears very expensive when compared to Ireland.
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JEL Codes:Q42: Alternative Energy Sources, D02: Institutions: Design, Formation, Operations, and Impact, L51: Economics of Regulation

Keywords: Renewable energy, SEM, BETTA, simulation model, market design

DOI: 10.5547/2160-5890.3.2.pdea

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Published in Volume 4, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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