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Technological Options for Power Generation

Ulf Hansen

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-4
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Abstract:
The demand for electricity is expected to double from 1990 to 2020. This will require 4000 GW of new capacity to be constructed worldwide, both as additions and replacements. Technical progress has made new conventional power plants more efficient and environment friendly than existing ones, and they can be built quicker and cheaper. Fossil fuels already form the basis for two thirds of all electricity and their importance will continue to grow, both as gasfired combined cycle and as coal-fired steam cycle. The technical choice depends on a wide array of considerations, including financial engineering. In liberalised electricity markets with global sourcing the emphasis is on minimum costs and cash-flow. Independent project developers currently fund 30% of all new generating capacity investments and the share is growing. The expanding role of fossil fuels runs counter to policies to reduce the emission of greenhouse gases. To reverse the trend would require strong support for renewables and acceptance of nuclear power.



Global Demand Growth of Power Generation, Input Choices and Supply Security

Kenichi Matsui

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-5
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Abstract:
The anticipated global demand growth for energy, and electricity in particular, is mapped for the coming 20 years. Five critical issues implied by this forecast are then spelled out: uncertainty, security of energy supply, energy financing, and the role of nuclear and renewable energy. Finally, based on a review of the energy revolutions which the human race has experienced during history, the paper sketches a long term energy future. It suggests the possibility of a new energy era in the 21st century with electricity and hydrogen as the main final energy and nuclear and renewables as the main primary energy, providing, coincidentally, a solution to the CO2 issues that loom so importantly at the end of the 20th century.



Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?

Reyer Gerlagh and Bob van der Zwaan

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-3
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Abstract:
This paper compares both the main physical options and the principal policy instruments to realize a deep cut in carbon dioxide emissions necessary to control global climate change. A top-down energy-economy model is used that has three emission reduction options: energy savings, a transition towards less carbon-intensive or non-carbon energy resources, and the use of carbon dioxide capture and storage technology. Five policy instruments - carbon taxes, fossil fuel taxes, non-carbon (renewable) energy subsidies, a portfolio standard for the carbon intensity of energy production, and a portfolio standard for the use of non-carbon (renewable) energy resources - are compared in terms of costs, efficiency and their impact on the composition of the energy supply system. One of our main conclusions is that a carbon intensity portfolio standard, involving the recycling of carbon taxes to support renewables deployment, is the most cost-efficient way to address the problem of global climate change. A comprehensive introduction of the capture and storage of carbon dioxide would contribute to reducing the costs of climate change control, but would not obviate the large-scale need for renewables.



The Willingness to Pay for Renewable Energy Sources: The Case of Italy with Socio-demographic Determinants

Carlo Andrea Bollino

Year: 2009
Volume: Volume 30
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-4
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Abstract:
According to the Renewable Sources EU Directive 2001/77/CE, the Italian Government goal is to attain the share of 22% in RES electricity production in 2010. In such context it becomes crucial to explore the existence of consumer's Willingness to Pay (WTP) in order to use renewable energy in the electricity production. This study is based on a national survey with 1601 interviews made, in Italy, in November 2006. My aim is twofold. Firstly, I wish to assess the consumer's WTP which is the basis for market sustainability of such energy policy goal and, secondly, I evaluate the share of the necessary public support to RES policy which is covered by the aggregate WTP of Italians. This is an implicit assessment of the plausibility/acceptance of the announced target policy. In my survey framework I obtain the consumer's WTP with two different approaches and to this end the sample has been divided in two parts. In the first sub-sample I propose the full price vector with a downward elicitation format while in the second sub-sample I use the same price vector with an upward elicitation format. In this paper I focus on the different uncertainty degree that affects respondent's choices. I take care econometrically of this issue using an individual stochastic valuation approach and a referendum approach. I obtain for most of the estimated models that estimates of WTP are in agreement with other international results. The aggregate WTP for RES in Italy, however, is (still) not enough to attain the Italian Government goal in 2010.



Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets

Arthur Henriot

Year: 2014
Volume: Volume 35
Number: Number 1
DOI: 10.5547/01956574.35.1.6
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Abstract:
This paper evaluates the benefits for an agent managing the wind power production within a given power system to trade in the intraday electricity markets, in a context of massive penetration of intermittent renewables. Using a simple analytical model we find out that there are situations when it will be costly for this agent to adjust its positions in intraday markets. A first key factor is of course the technical flexibility of the power system: if highly flexible units provide energy at very low prices in real-time there is no point in participating into intraday markets. Besides, we identify the way wind production forecast errors evolve constitutes another essential, although less obvious, key-factor. Both the value of the standard error and the correlation between forecasts errors at different gate closures will determine the strategy of the wind power manager. Policy implications of our results are the following: low liquidity in intraday markets will be unavoidable for given sets of technical parameters, it will also be inefficient in some cases to set discrete auctions in intraday markets, and compelling players to adjust their position in intraday markets will then generate additional costs.



Carbon content of electricity futures in Phase II of the EU ETS

Harrison Fell, Beat Hintermann, and Herman Vollebergh

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.hfel
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Abstract:
We estimate the relationship between electricity, fuel and carbonpricesinGermany, France, the Netherlands, the Nord Pool market and Spain, using one-year futures for base and peakload prices for the years 2008-2011, corresponding to physical settlement during the second market phase of the EU ETS. We employ a series of estimation methods that allow for an increasing interactionbetweenelectricityand input prices on the one hand, and between electricity markets on the other. The results vary by country due to different generation portfolios. Overall, we find that (a) carbon costs are passed through fully in most countries; (b) under some model specifications, cost pass-through is higher during peakload than during baseload for France, Germany and the Netherlands; and (c) the results are sensitive to the degree of cross-commodity and cross-market interaction allowed.



The Implicit Carbon Price of Renewable Energy Incentives in Germany

Claudio Marcantonini, A. Denny Ellerman

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.cmar
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Abstract:
This research analyzes the German experience in promoting Renewable Energy (RE) as an instrument to reduce GHG emissions. It identifies the cost of reducing CO2 emissions in the power sector through the promotion of wind and solar energy for the years 2006-2010. A RE carbon surcharge and an implicit carbon price due to the RE incentives are calculated. The RE carbon surcharge is the ratio of the net cost of the RE over the CO2 emission reductions resulting from actual RE injections into the electric power system. The implicit carbon price is the sum of the RE carbon surcharge and the EUA price. Results show that for the period analyzed both the RE carbon surcharge and the implicit carbon price of wind are on the order of tens of euro per tonne of CO2, while for solar are on the order of hundreds of euro per tonne of CO2.



Why Wind Is Not Coal: On the Economics of Electricity Generation

Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.lhir
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Abstract:
Electricity is a paradoxical economic good: it is highly homogeneous and heterogeneous at the same time. Electricity prices vary dramatically between moments in time, between location, and according to lead-time between contract and delivery. This three-dimensional heterogeneity has implication for the economic assessment of power generation technologies: different technologies, such as coal-fired plants and wind turbines, produce electricity that has, on average, a different economic value. Several tools that are used to evaluate generators in practice ignore these value differences, including "levelized electricity costs", "grid parity", and simple macroeconomic models. This paper provides a rigorous and general discussion of heterogeneity and its implications for the economic assessment of electricity generating technologies. It shows that these tools are biased, specifically, they tend to favor wind and solar power over dispatchable generators where these renewable generators have a high market share. A literature review shows that, at a wind market share of 30-40%, the value of a megawatt-hour of electricity from a wind turbine can be 20-50% lower than the value of one megawatt-hour as demanded by consumers. We introduce "System LCOE" as one way of comparing generation technologies economically.



Carbon Price instead of Support Schemes: Wind Power Investments by the Electricity Market

Marie Petitet, Dominique Finon, and Tanguy Janssen

Year: 2016
Volume: Volume 37
Number: Number 4
DOI: 10.5547/01956574.37.4.mpet
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Abstract:
This paper studies wind power development within electricity markets with a significant carbon price as the sole incentive. Simulation of electricity market and investment decisions by System Dynamics modelling is used to trace the evolution of the electricity generation mix over a 20-year period from an initially thermal system. A range of carbon prices is tested to determine the value above which market-driven development of wind power becomes economically possible. This requires not only economic competitiveness in terms of cost-price, but also profitability versus traditional fossil-fuel technologies. Results stress that wind power is profitable for investors only if the carbon price is significantly higher than the price required for making wind power MWh's cost-price competitive on the basis of levelized costs. In this context, the market-driven development of wind power seems only possible if there is a strong commitment to climate policy, reflected in a stable and high carbon price. Moreover, market-driven development of wind power becomes more challenging if nuclear is part of investment options. Keywords: Electricity market, Renewables, Investment, Carbon price, System dynamics modelling.



Optimal Price Design in the Wholesale Electricity Market

Simona Bigerna and Carlo Andrea Bollino

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.SI2.sbig
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Abstract:
In this paper, we construct an optimal price design mechanism to determine the equilibrium in the day-ahead electricity market, specifically aimed at solving the uncomfortable conflict between conventional thermal sources (CTS) and renewable energy sources (RES). We find that the actual hourly market design is inadequate to achieve an efficient solution in the presence of a large and increasing share of RES. It is not conducive to catalyzing the correct price signal for future investments and does not take into account welfare considerations. Our proposal for a new market design is based on three main pillars. We state pro-competitive incentives to CTS participation in the market. We take into full account the opportunity cost of RES for society and propose correct price signals on the demand side through an optimal Ramsey pricing scheme. We show an empirical application to the Italian electricity market, using empirical measures of LCOE for RES and empirical estimation of heterogeneous buyers' behavior. The results show improvement in efficiency and welfare in the Italian electricity market with respect to the existing zonal market prices for suppliers and uniform price for buyers.




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