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The Rise of Third Parties and the Fall of Incumbents Driven by Large-Scale Integration of Renewable Energies: The Case of Germany

Gert Brunekreeft, Marius Buchmann, and Roland Meyer

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.SI2.gbru
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Abstract:
The energy transition is dramatically changing the electricity supply industry in Germany implying two big trends. First, significant market entry by third parties (i.e., non-incumbents). Based on empirical evidence, we argue that the emergence of third parties is the immediate result of the large-scale integration of renewable energy sources. The electricity supply industry is changing quickly from a top-down, single-firm game to a decentralized multiple-player system, with far-reaching consequences for the governance and regulatory structure. Second, the incumbent players are facing disruptive challenges: under pressure of the energy transition, conventional centralized generation is losing profit margins very quickly. We analyze the disruptive challenges and sketch how the incumbents respond by splitting their activities into an old business, which is likely to be phased-out, and a new, future-oriented business: renewable energies, the distribution business, and customer-oriented solutions.



Auctions for Renewables: Does the Choice of the Remuneration Scheme Matter?

Ali Darudi

Year: 2023
Volume: Volume 44
Number: Number 6
DOI: 10.5547/01956574.44.6.adar
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Abstract:
Auctions are increasingly used to support renewable energy sources (RES). The choice of the remuneration scheme is one of the major design challenges policymakers face. This paper analyzes the effects of remuneration schemes on RES auctions’ success in markets with imperfect competition. I develop a game-theoretical auction/operation framework to model the feedback effects between the spot market’s strategic behavior and the auction stage’s bidding behavior. The analysis indicates that policymakers concerned about true-cost bidding, allocative efficiency, spot price, total payments to RES, and non-realization risk may prefer feed-in-tariff (FIT) remuneration. However, feed-in-premium (FIP) remunerations may outperform FIT ones from a social welfare perspective, particularly in markets with dirty technologies at the margin. A machine-learning-based simulation strategy is also presented, indicating that, for an auction for 14 GW of onshore wind in France, FIP auction with a winning incumbent leads to 1.40% higher prices than FIT ones.





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