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Economics of Energy & Environmental Policy
Volume 1, Number 2

Impacts of Intermittent Renewables on Electricity Generation System Operation

Ignacio J. Perez-Arriaga and Carlos Batlle

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.1
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All power generation technologies leave their particular imprint on the power system that they belong to. Wind and solar power have only recently reached significant levels of penetration in some countries, but they are expected to grow much during the next few decades, and contribute substantially to meeting future electricity demand, see e.g. European Commission (2011). Wind, photovoltaic (PV) solar and concentrated solar power (CSP) with no storage have non-controllable variability, partial unpredictability and locational dependency. These attributes make an analysis of their impacts on electricity generation system operation and design particularly interesting. This paper reviews how a strong presence of intermittent renewable generation will change how future power systems are planned, operated and controlled. The change is already noticeable in countries that currently have a large penetration of wind and solar production. The mix of generation technologies, and potentially market rules, will have to adapt to accommodate this presence. Regulatory adjustments might be needed to attract investment in "well adapted" technologies. This paper identifies open issues that deserve further analysis from a technical, economic and regulatory perspective.

Contracting for Wind Generation

David M. Newbery

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.2
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The UK Government proposes offering long-term Feed-in-Tariffs (FiTs) to low-carbon generation to reduce risk and encourage new entrants. Their preference is for a Contract-for-Difference (CfD) for all generation regardless of type. I argue that a standard CfD is unsuitable for on-shore wind, where a fixed FiT appears less risky. The estimated extra trading and balancing costs of a CfD for on-shore wind might be £56 million/yr by 2020 and £170 million/yr for all wind. The extra costs of investment risk could be comparable and additional.

Solar Integration

Cedric Philibert

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.3
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Solar energy can enter our energy systems through many doors and windows, mostly as heat and electricity. As costs go down, especially for photovoltaic electricity, the variability of the resource becomes a dominant issue.Interconnections,load management, flexible fossil or hydro power plants and storage capacities of pumped hydro plants combine to make the daily variability manageable, but seasonal variability may be more difficult to address while avoiding overinvestment in solar electricity capacities.

Market and Policy Barriers to Deployment of Energy Storage

Ramteen Sioshansi, Paul Denholm, and Thomas Jenkin

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.4
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There has recently been resurgent interest in energy storage, due to a number of developments in the electricity industry. Despite this interest, very little storage, beyond some small demonstration projects, has been deployed recently. While technical issues, such as cost, device efficiency, and other technical characteristics are often listed as barriers to storage, there are a number of non-technical and policy-related issues. This paper surveys some of these main barriers and proposes some potential research and policy steps that can help address them. While the discussion is focused on the United States, a number of the findings and observations may be more broadly applicable.

Can Bioenergy Assessments Deliver?

Felix Creutzig, Christoph von Stechow, David Klein, Carol Hunsberger, Nico Bauer, Alexander Popp, and Ottmar Edenhofer

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.5
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The role of biomass as a primary energy resource is highly debated. Next generation biofuels are suggested to be associated with low specific greenhouse gas emissions. But land consumption, demand for scarce water, competition with food production and harmful indirect land-use effects put a question mark over the beneficial effects of bioenergy deployment. In this paper, we investigate the current state of bioenergy assessments and scrutinize the topics and perspectives explored in the Special Report on Renewable Energy Sources and Climate Change. We suggest that an appropriate assessment requires a comprehensive literature review, the explicit exposition of disparate viewpoints, and exploration of policy-relevant content based on plausible "storylines". We illustrate these storylines with the IPCC's emission scenarios and point out routes to improve assessment making on the future role of bioenergy.

Support Schemes for Renewable Energy: An Economic Analysis

Richard Green and Adonis Yatchew

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.6
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We consider leading approaches to the decarbonisation of electricity supply. Price supports through long term contracts, such as feed-in-tariffs have been very effective at eliciting rapid escalation of renewable supply, largely because risks have been transferred away from suppliers and tariffs have been generous. However, countries with the most ambitious programs of this type (Denmark, Germany and Spain) have experienced a noticeable increase in electricity costs. Quota programs, combined with some form of tradable carbon certificates, have typically produced a lesser response with lower impact on consumers. Assured access to grids has also played an important role in expediting growth. Both genres of policy instruments increase global demand for renewable technologies, thereby promoting dynamic efficiency. However, other inefficiencies remain. Feed-in-tariffs place primary onus of technology selection and support on governments and regulators. Limitations on carbon trade reduce effectiveness and increase costs as well. The next generation of instruments would benefit from better locational and temporal price signals.

The Future of Nuclear Power After Fukushima

Paul L. Joskow and John E. Parsons

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.7
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This paper analyzes the impact of the Fukushima accident on the future of nuclear power around the world. We begin with a discussion of the "but for" baseline and the much discussed "nuclear renaissance." Our pre-Fukushima benchmark for growth in nuclear generation in the U.S. and other developed countries is much more modest than many bullish forecasts of a big renaissance in new capacity may have suggested. For at least the next decade in developed countries, it is composed primarily of life extensions for many existing reactors, modest uprates of existing reactors as their licenses are extended, and modest levels of new construction. The majority of forecasted new construction is centered in China, Russia and the former states of the FSU, India and South Korea. In analyzing the impact of Fukushima, we break the effect down into two categories: the impact on existing plants, and the impact on the construction of new units. In both cases, we argue that the accident at Fukushima will contribute to a reduction in future trends in the expansion of nuclear energy, but at this time these effects appear to be quite modest at the global level.

How a "Low Carbon" Innovation Can Fail--Tales from a "Lost Decade" for Carbon Capture, Transport, and Sequestration (CCTS)

Christian von Hirschhausen, Johannes Herold, and Pao-Yu Oei

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.8
View Abstract

This paper analyzes the discrepancy between the high hopes placed in Carbon Capture, Transport, and Storage (CCTS) and the meager results that have been observed in reality, and advances several explanations for what we call a "lost decade" for CCTS. We trace the origins of the high hopes placed in this technology by industry and policymakers alike, and show how the large number of demonstration projects required for a breakthrough did not follow. We then identify possible explanations for the "lost decade", such as incumbent resistance to structural change, wrong technology choices, over-optimistic cost estimates, a premature focus on energy projects instead of industry, and the underestimation of transport and storage issues. We conclude it is likely that we have to live for quite some time with a cognitive dissonance in which top-down models continue to place hope in the CCTS-technology by reducing its expected fixed and variable costs, and bottom-up researchers continue to count failed pilot projects.

Global Climate Games: How Pricing and a Green Fund Foster Cooperation

Peter Cramton and Steven Stoft

DOI: http://dx.doi.org/10.5547/2160-5890.1.2.9
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The most efficient global climate policy is to price carbon. The Kyoto-Copenhagen agenda was intended to do this with a system of international cap and trade. We view these negotiations as a game in which countries choose their quantity targets based on self interest. Like the analogous public-goods game, in which countries choose their abatement levels, we find this game leads to uncooperative behavior and suggest that this is why the Kyoto approach inevitably failed. By contrast, a game in which all countries vote for a global quantity target or a global price target can lead to a highly cooperative choice of target. However, the assignment of responsibilities for a global quantity target stymies implementation of a global cap. The global-price-target game largely overcomes this barrier, because a uniform global price providesafocalpointforcooperation.Howeverlow-emission countries apparently prefer a much lower global-price than more prosperous countries unless a Green Fund is implemented. A game that couples such a fund to the global price target can largely overcome this barrier to cooperation. We describe such a game along with its equilibrium outcome, which promises to be inexpensive and cooperative.

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