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Learning by Doing with Constrained Growth Rates:An Application to Energy Technology Policy

Karsten Neuhoff

Year: 2008
Volume: Volume 29
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-9
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Learning by doing methodology attributes cost reductions of a technology to cumulative investment and experience. This paper argues that in addition market growth rates must also be considered. Historically growth rates have been limited in most sectors, thus allowing for feedback in the learning process. When market growth is below the optimal rate, the marginal value of additional investment could be a multiple of the direct learning benefit. Analytic and numeric models quantify this impact emphasizing the need for tailored technology policy in addition to carbon pricing. Implications for the modeling of endogenous technological change are discussed.

Power markets with Renewables: New perspectives for the European Target Model

Karsten Neuhoff, Sophia Wolter and Sebastian Schwenen

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.2.kneu
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We discuss at the European example how power market design evolves with increasing shares of intermittent renewables. Short-term markets and system operation have to accommodate for the different needs of renewable and conventional generation assets and flexibility options. This can be achieved by pooling resources over larger geographic areas through common auction platforms, realizing the full flexibility of different assets based on multi-part bids while efficiently allocating scarce network resources. For investment and re-investment choices different technology groups like wind and solar versus fossil fuel based generation may warrant a different treatment - reflecting differing levels of publicly accessible information, requirements for grid infrastructure, types of strategic choices relevant for the sector and shares of capital cost in overall generation costs. We discuss opportunities for such a differentiated treatment while maintaining synergies in short-term system operation.

Financing Power: Impacts of Energy Policies in Changing Regulatory Environments

Nils May and Karsten Neuhoff

Year: 2021
Volume: Volume 42
Number: Number 4
DOI: 10.5547/01956574.42.4.nmay
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Power systems with increasing shares of wind and solar power generation have higher capital costs and lower operational costs than power systems based on fossil fuels. This increases the importance of the financing costs for total system cost. We quantify how renewable energy support policies can affect the financing costs by addressing regulatory risk and facilitating hedging. We use interview data on wind power financing costs from the EU and model how long-term contracts signed between project developers and energy suppliers impact financing costs. Regression analysis of investors' financing costs and an analytical model of off-takers financing costs reveal that between the support policies, the costs of renewable energy deployment differ by around 30 percent, but can be significantly lower or higher, depending on the financial situation of energy suppliers.

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