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Comparing Renewable Energy Policies in EU-15, U.S. and China: A Bayesian DSGE Model

Amedeo Argentiero, Tarek Atalla, Simona Bigerna, Silvia Micheli, and Paolo Polinori

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.aarg
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Abstract:
The promotion of renewable energy sources (RES) by governments is one way of helping countries to meet their energy needs while lowering greenhouse gas emissions. In this paper, we examine the role of energy policy in RES promotion, based on a carbon tax and RES price subsidy, at a time of technological and demand shocks in the European Union (E.U.) 15 countries, the United States (U.S.) and China, focusing on the macroeconomic implications. Using a dynamic stochastic general equilibrium model for RES and fossil fuels, our results suggest that, in the presence of a total factor productivity shock in the fossil fuel sector, such an energy policy can also be a driving force for smoothing the reduction of RES in the energy market (and vice versa). Additionally, we show that the E.U.15 grouping has a comparative advantage in terms of reaching grid parity compared with the other countries we considered which are more fossil fuel dependent.



Analyzing the Effects of Renewable Energy and Climate Conditions on Consumer Welfare

Tarek Atalla, Simona Bigerna, Carlo Andrea Bollino, and Rolando Fuentes

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.tata
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Abstract:
This paper aims to measure the impact of the gradual adoption of Renewable Energy Sources (RES) on the welfare of consumers. To this end, we construct a theoretically founded measure of the true cost of living (TCL) and the equivalence scale (ES) for the household sector, based on a weather database of heating and cooling degree days. We estimate those values for 64 countries, which represent over two-thirds of the world population, according to World Bank statistics. We assume that the identified household in each country minimizes its expenditure on energy and other goods. We simulate alternate scenarios of renewables implementation in 2035, taking account of different RES prices, and assess the related societal implications of a gradual transition from fossil fuels to RES. The empirical results offer policymakers a basis for designing appropriate scenarios for the deployment of renewables, with the aim of fostering consumer welfare even in the context of international negotiations.



The Economic Value of Distributed Storage at Different Locations on an Electric Grid

Wooyoung Jeon, Alberto J. Lamadrid, and Timothy D. Mount

Year: 2019
Volume: Volume 40
Number: Number 4
DOI: 10.5547/01956574.40.4.wjeo
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Abstract:
The objective of this article is to analyze the system benefits of distributed storage at different locations on a grid that has a high penetration of renewable generation. The chosen type of distributed storage modeled is deferrable demand (e.g., thermal storage) because it is relatively inexpensive to install compared to batteries and could potentially form a large component of the peak system load. The advantage of owning deferrable demand is that the purchase of energy from the grid can be decoupled from the delivery of an energy service to customers. Consequently, these customers can reduce costs by shifting their purchases from expensive peak periods to off-peak periods when electricity prices are low. In addition, deferrable demand can provide ramping services to the grid to mitigate the uncertainty of renewable generation. The primary economic issue addressed in this paper is to determine how the storage capacity is allocated between shifting load and providing ramping services. The basic economic tradeoff is between the benefit from shifting more load from peak periods to less expensive periods, and reserving some storage capacity for ramping to reduce the amount of conventional reserve capacity purchased. Our approach uses a new form of stochastic, multi-period Security Constrained Optimal Power Flow (SCOPF) that minimizes the expected system costs for energy and ancillary services over a 24-hour horizon. For each hour, five different levels of wind generation may be realized and these are treated as different system states with known probabilities of occurring. This model is applied to a reduction of the grid in New York State and New England and simulates the hourly load on a hot summer day, treating potential wind generation at different sites as stochastic inputs. The results determine the expected amount and location of conventional generating capacity dispatched, the reserve capacity committed to maintain operating reliability, the charging/discharging of storage capacity, and the amount of potential wind generation spilled. The results show there are major differences in how the deferrable demand at two large load centers, Boston and New York City, is managed, and we provide an explanation for these differences.



Renewable and Nonrenewable Energy Consumption, Economic Growth, and Emissions: International Evidence

Thai-Ha Le, Youngho Chang, and Donghyun Park

Year: 2020
Volume: Volume 41
Number: Number 2
DOI: 10.5547/01956574.41.2.thle
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Abstract:
This study aims to reexamine how energy consumption interacts with economic growth and emissions using a panel data of a global sample consisting of 102 countries, from 1996 to 2012. The effects of renewable energy and nonrenewable energy sources are separately examined. The consumption of both renewable and nonrenewable energy appears to have contributed significantly to the level of income across countries, implying that promoting renewable energy benefits economic development. The empirical evidence suggests that the use of non-renewable energy consumption significantly raised the level of emissions across different income groups of countries. On the other hand, our findings suggest that the use of renewable energy sources helped tackle emissions in developed countries but not in developing countries. The success of developed countries in controlling emissions through renewable energy has significant policy implications for developing countries.



Locational (In)Efficiency of Renewable Energy Feed-In Into the Electricity Grid: A Spatial Regression Analysis

Tim Höfer and Reinhard Madlener

Year: 2021
Volume: Volume 42
Number: Number 1
DOI: 10.5547/01956574.42.1.thof
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Abstract:
This paper presents an econometric analysis of curtailment costs of renewable energy sources (RES) in Germany. The study aims at explaining and quantifying the regional variability of RES curtailment, which is a measure to relieve grid overstress by temporarily disconnecting RES from the electricity grid. We apply a Heckit sample selection model, which corrects bias from non-randomly selected samples. The selection equation estimates the probability of occurrence of RES curtailment in a region. The outcome equation corrects for cross-sectional dependence and quantifies the effect of RES on curtailment costs. The results show that wind energy systems connected to the distribution grid increase RES curtailment costs by 0.7% per MW (or 0.2% per GWh) in subregions that have experienced RES curtailment over the period 2015-2017. The implication of this finding is that policymakers should set price signals for renewables that consider the regional grid overstress, in order to mitigate the cost burden on consumers due to excess generation from RES.



Market Power and Renewables: The Effects of Ownership Transfers

Olivier Bahn, Mario Samano, and Paul Sarkis

Year: 2021
Volume: Volume 42
Number: Number 4
DOI: 10.5547/01956574.42.4.obah
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Abstract:
Adding renewable energy sources (RES) to an electricity market has an ambiguous effect on wholesale prices. The merit order effect (MoE) has a downward pressure on prices while, with market power, higher inframarginal rents will tend to increase prices. We quantify the interaction of the two effects in the Ontario electricity market. We identify the market power effect by simulating transfers of RES capacity from the fringe to larger firms: these transfers increase prices by up to 24%. We then add RES capacity and allocate it to players with varying levels of market power. Following a net expansion of RES capacity of 5% relative to total capacity, prices decrease by 30% when new capacity is assigned to the fringe, but only by 7% when assigned to the largest firm. Our findings show that the MoE is largely mitigated by market power, hence the importance of the market structure in the design of uniform incentives for RES adoption.



The Impact of Renewable Energy Generation on the Spot Market Price in Germany: Ex-Post Analysis using Boosting Method

Alexander Ryota Keeley, Ken’ichi Matsumoto, Kenta Tanaka, Yogi Sugiawan, and Shunsuke Managi

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.akee
View Abstract

Abstract:
This study combines regression analysis with machine learning analysis to study the merit order effect of renewable energy focusing on German market, the largest market in Europe with high renewable energy penetration. The results show that electricity from wind and solar sources reduced the spot market price by 9.64 €/MWh on average during the period from 2010 to 2017. Wind had a relatively stable impact across the day, ranging from 5.88 €/MWh to 8.04 €/MWh, while the solar energy impact varied greatly across different hours, ranging from 0.24 €/MWh to 11.78 €/MWh and having a stronger impact than wind during peak hours. The results also show characteristics of the interactions between renewable energy and spot market prices, including the slightly diminishing merit order effect of renewable energy at high generation volumes. Finally, a scenario-based analysis illustrates how different proportions of wind and solar energies affect the spot market price.





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