The renewable energy targets of the Maghreb countries: Impact on electricity supply and conventional power markets

Morocco, Algeria and Tunisia, the three countries of the North African Maghreb region, are showing increased efforts to integrate renewable electricity into their power markets. Like many other countries, they have pronounced renewable energy targets, defining future shares of “green” electricity in their national generation mixes. The individual national targets are relatively varied, reflecting the different availability of renewable resources in each country, but also the different political ambitions for renewable electricity in the Maghreb states. Open questions remain regarding the targets’ economic impact on the power markets. Our article addresses this issue by applying a linear electricity market optimization model to the North African countries. Assuming a competitive, regional electricity market in the Maghreb, the model minimizes dispatch and investment costs and simulates the impact of the renewable energy targets on the conventional generation system until 2025. Special emphasis is put on investment decisions and overall system costs.     

Renewable energy: Externality costs as market barriers

This paper addresses the impact of environmentally based market failure constraints on the adoption of renewable energy technologies through the quantification in financial terms of the externalities of electric power generation, for a range of alternative commercial and almost-commercial technologies. It is shown that estimates of damage costs resulting from combustion of fossil fuels, if internalised into the price of the resulting output of electricity, could lead to a number of renewable technologies being financially competitive with generation from coal plants. However, combined cycle natural gas technology would have a significant financial advantage over both coal and renewables under current technology options and market conditions. On the basis of cost projections made under the assumption of mature technologies and the existence of economies of scale, renewable technologies would possess a significant social cost advantage if the externalities of power production were to be “internalised”. Incorporating environmental externalities explicitly into the electricity tariff today would serve to hasten this transition process.     

Pros and cons of exposing renewables to electricity market risks—A comparison of the market integration approaches in Germany,Spain, and the UK

The article examines how renewable electricity (RES-E) producers are integrated into the electricity market under the support legislations and regulatory frameworks of Germany, Spain, and the UK. Focus is on wind power, which faces the highest market integration challenge of all RES-E. The analysis shows that the three countries follow contrasting approaches of exposing RES-E producers to the market risks of forward electricity markets, balancing markets and system planning requirements. Risk exposure is highest in the UK and lowest in Germany. From a policy maker's perspective, there is a trade-off between a “high risk” and a “low risk” approach. When RES-E face high market risks, a higher level of financial support is required to stimulate RES-E development than in a low risk environment, but the exposure to market risks may also give an incentive to make efficient use of the respective market, thus limiting the indirect costs to society. The special characteristics of wind energy, however, put natural limits to the response of wind power plants to market prices and locational price signals and will increasingly influence electricity markets and grid infrastructure. These interdependencies should be recognised in the design of RES-E policies and market regulations.     

Joint electricity and carbon market for Northeast Asia energy interconnection

Decarbonization of the electricity sector is crucial to mitigate the impacts of climate change and global warming over the coming decades. The key challenges for achieving this goal are carbon emission trading and electricity sector regulation, which are also the major components of the carbon and electricity markets, respectively. In this paper, a joint electricity and carbon market model is proposed to investigate the relationships between electricity price, carbon price, and electricity generation capacity, thereby identifying pathways toward a renewable energy transition under the transactional energy interconnection framework. The proposed model is a dynamically iterative optimization model consisting of upper- level and lower-level models. The upper-level model optimizes power generation and obtains the electricity price, which drives the lower-level model to update the carbon price and electricity generation capacity. The proposed model is verified using the Northeast Asia power grid. The results show that increasing carbon price will result in increased electricity price, along with further increases in renewable energy generation capacity in the following period. This increase in renewable energy generation will reduce reliance on carbon-emitting energy sources, and hence the carbon price will decline. Moreover, the interconnection among zones in the Northeast Asia power grid will enable reasonable allocation of zonal power generation. Carbon capture and storage (CCS) will be an effective technology to reduce the carbon emissions and further realize the emission reduction targets in 2030-2050. It eases the stress of realizing the energy transition because of the less urgency to install additional renewable energy capacity.     

Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain

It is sometimes argued that renewables are “expensive”. However, although it is generally true that the private costs of renewable electricity generation are certainly above those of conventional electricity, that statement fails to consider the social benefits provided by electricity from renewable energy sources (RES-E), including environmental and socioeconomic ones. This paper empirically analyses an additional albeit usually neglected benefit: the reduction in the wholesale price of electricity as a result of more RES-E generation being fed into the grid. The case of wind generation in Spain shows that this reduction is greater than the increase in the costs for the consumers arising from the RES-E support scheme (the feed-in tariffs), which are charged to the final consumer. Therefore, a net reduction in the retail electricity price results, which is positive from a consumer point of view. This provides an additional argument for RES-E support and contradicts one of the usual arguments against RES-E deployment: the excessive burden on the consumer.     

Statistical analysis of negative prices in European balancing markets

The presence of renewable power generation technologies increases the need for system flexibility due to their variable nature. The increasing share of variable renewables in European power systems create a downward adequacy problem, which deals with the ability of power systems to cope with periods of excess generation. The occurrence of negative prices on Central Western European electricity markets confirms the relevance of this issue, which is referred to as “incompressibility of power systems” and is assessed as a barrier for further renewable power integration. The objective of this article is to identify the main drivers of negative price periods in European balancing markets, by means of both an empirical and regression analysis. Results confirm a positive relation with the scheduled generation of renewables and inflexible base load, as well as a negative relation with the scheduled system load. Furthermore, the occurrence of negative prices is related to the positive and negative forecast error of renewable generation and demand, respectively. It is concluded that negative balancing market prices provide a market signal for investments in flexibility sources such as flexible generation, demand response, electricity storage, and interconnector capacity.     

Design of an economically efficient feed-in tariff structure for renewable energy development

Evidence suggests, albeit tentatively, that feed-in tariffs (FITs) are more effective than alternative support schemes in promoting renewable energy technologies (RETs). FITs provide long-term financial stability for investors in RETs, which, at the prevailing market price of electricity, are not currently cost-efficient enough to compete with traditional fossil fuel technologies. On the other hand, if not properly designed, FITs can be economically inefficient, as is widely regarded to have been the case under the Public Utility Regulatory Policies Act of 1978 (PURPA). Under PURPA, too high a guaranteed price led to the creation of so-called “PURPA machines”—poorly performing generating units that could survive financially only because of heavy subsidies that came at the expense of retail customers. Similarly, because of their adverse impacts on retail electricity rates, German FITs have been subject to increasing political pressure from utilities and customers. In this paper, we propose an innovative two-part FIT, consisting of both a capacity payment and a market-based energy payment, which can be used to meet the renewables policy goals of regulators. Our two-part tariff design draws on the strengths of traditional FITs, relies on market mechanisms, is easy to implement, and avoids the problems caused by distorting wholesale energy markets through above-market energy payments. The approach is modeled on forward capacity market designs that have been recently implemented by several regional transmission organizations in the USA to address needs for new generating capacity to ensure system reliability.     

Recognising the potential for renewable energy heating and cooling

Heating and cooling in the industrial, commercial, and domestic sectors constitute around 40–50% of total global final energy demand. A wide range of renewable energy heating and cooling (REHC) technologies exists but they are presently only used to meet around 2–3% of total world demand (excluding from traditional biomass). Several of these technologies are mature, their markets are growing, and their costs relative to conventional heating and cooling systems continue to decline. However, in most countries, policies developed to encourage the wider deployment of renewable electricity generation, transport biofuels and energy efficiency have over-shadowed policies aimed at REHC technology deployment. This paper, based on the findings of the International Energy Agency publication Renewables for Heating and Cooling—Untapped Potential, outlines the present and future markets and compares the costs of providing heating and cooling services from solar, geothermal and biomass resources. It analyses current policies and experiences and makes recommendations to support enhanced market deployment of REHC technologies to provide greater energy supply security and climate change mitigation. If policies as successfully implemented by the leading countries were to be replicated elsewhere (possibly after modification to better suit local conditions), there would be good potential to significantly increase the share of renewable energy in providing heating and cooling services.     

A real options evaluation model for the diffusion prospects of new renewable power generation technologies

This study presents a policy planning model that integrates learning curve information on renewable power generation technologies into a dynamic programming formulation featuring real options analysis. The model recursively evaluates a set of investment alternatives on a year-by-year basis, thereby taking into account that the flexibility to delay an irreversible investment expenditure can profoundly affect the diffusion prospects of renewable power generation technologies. Price uncertainty is introduced through stochastic processes for the average wholesale price of electricity and for input fuel prices. Demand for electricity is assumed to be increasingly price-sensitive, as the electricity market deregulation proceeds, reflecting new options of consumers to react to electricity price changes (such as time-of-use pricing, unbundled electricity services, and choice of supplier). The empirical analysis is based on data for the Turkish electricity supply industry. Apart from general implications for policy-making, it provides some interesting insights about the impact of uncertainty and technical change on the diffusion of various emerging renewable energy technologies.     

Techno-economic analysis of PEM fuel cells role in photovoltaic-based systems for the remote base stations

Expansion of telecommunication networks even to the most remote areas where connection to the utility grid could never be justified, especially in touristic regions, has led to the increasing need for stand-alone power systems. In Adriatic coastal area employment of hybrid photovoltaic-based systems is straightforward due to high sun potential. Inherent intermittent nature of renewable sources is especially not compatible with telecommunication system who require uninterrupted power supply. This leads to the need of not only energy storage, but also a “back up” solution in the case of primary system failure. Emphasis is put on the system reliability and simplicity while system price is not necessarily top priority. Usual approach of using diesel generators as a “back up” has been challenged by the introduction of PEM fuel cells. Even with hydrogen technologies market development still lagging behind some comparable advantages such as high energy conversion efficiency, silent operation and no emissions make PEM fuel cells a legitimate candidate for replacing traditional oil burning generators. Techno-economic analysis of various stand-alone power systems for the remote base station on an Adriatic island is made. At the moment, levelized cost of electricity point of view still gives slight advantage to the diesel generators. Though, uncertain petroleum market and fast developing hydrogen technology market could reverse this trend in the near future. Long term reliability of PEM fuel cells system still needs to be examined in practice, as this combined with pro-environmental characteristics of fuel cells can make the difference especially in pristine and protected areas.     

A reduced-form approach for representing the impacts of wind and solar PV deployment on the structure and operation of the electricity system

In many climate change mitigation scenarios, integrated assessment models of the energy and climate systems rely heavily on renewable energy technologies with variable and uncertain generation, such as wind and solar PV, to achieve substantial decarbonization of the electricity sector. However, these models often include very little temporal resolution and thus have difficulty in representing the integration costs that arise from mismatches between electricity supply and demand. The global integrated assessment model, MESSAGE, has been updated to explicitly model the trade-offs between variable renewable energy (VRE) deployment and its impacts on the electricity system, including the implications for electricity curtailment, backup capacity, and system flexibility. These impacts have been parameterized using a reduced-form approach, which allows VRE integration impacts to be quantified on a regional basis. In addition, thermoelectric technologies were updated to include two modes of operation, baseload and flexible, to better account for the cost, efficiency, and availability penalties associated with flexible operation. In this paper, the modeling approach used in MESSAGE is explained and the implications for VRE deployment in mitigation scenarios are assessed. Three important stylized facts associated with integrating high VRE shares are successfully reproduced by our modeling approach: (1) the significant reduction in the utilization of non-VRE power plants; (2) the diminishing role for traditional baseload generators, such as nuclear and coal, and the transition to more flexible technologies; and (3) the importance of electricity storage and hydrogen electrolysis in facilitating the deployment of VRE.     

Basic concepts for designing renewable electricity support aiming at a full-scale transition by 2050

Renewable electricity supply is a crucial factor in the realization of a low-carbon energy economy. The understanding is growing that a full turn-over of the electricity sectors by 2050 is an elementary condition for avoiding global average temperature increase beyond 2 °C. This article adopts such full transition as Europe's target when designing renewable energy policy. An immediate corollary is that phasing-in unprecedented energy efficiency and renewable generation must be paralleled by phasing-out non-sustainable fossil fuel and nuclear power technologies. The double phasing programme assigns novel meaning to nearby target settings for renewable power as share of total power consumption. It requires organizing in the medium term EU-wide markets for green power, a highly demanding task in the present context of poorly functional markets in brown power. The EU Commission's 2007/2008 proposals of expanding tradable certificates markets were not based on solid analysis of past experiences and future necessities. The keystone of sound policies on renewable electricity development is a detailed scientific differentiation and qualification of renewable electricity sources and technologies, for measuring the huge diversity in the field. We provide but structuring concepts about such qualification, because implementation requires extensive research resources.     

Towards sustainable energy systems: The related role of hydrogen

The role of hydrogen in long run sustainable energy scenarios for the world and for the case of Germany is analysed, based on key criteria for sustainable energy systems. The possible range of hydrogen within long-term energy scenarios is broad and uncertain depending on assumptions on used primary energy, technology mix, rate of energy efficiency increase and costs degression (“learning effects”). In any case, sustainable energy strategies must give energy efficiency highest priority combined with an accelerated market introduction of renewables (“integrated strategy”). Under these conditions hydrogen will play a major role not before 2030 using natural gas as a bridge to renewable hydrogen. Against the background of an ambitious CO₂-reduction goal which is under discussion in Germany the potentials for efficiency increase, the necessary structural change of the power plant system (corresponding to the decision to phase out nuclear energy, the transformation of the transportation sector and the market implementation order of renewable energies (“following efficiency guidelines first for electricity generation purposes, than for heat generation and than for the transportation sector”)) are analysed based on latest sustainable energy scenarios.     

Support schemes for renewable electricity in the European Union: Producer strategies and competition

Current discussion about how to reform European support schemes for renewable electricity neglects certain risks of market power in wholesale electricity markets. In a stylized Cournot model of interacting spot and forward electricity markets, I analyze how different price-based support schemes affect producer strategies and, ultimately, competition in the wholesale market. I compare the strategic behavior of renewable and conventional producers in terms of electricity production and forward market sales in the presence of two different price-based support schemes: feed-in tariffs and feed-in premiums. I show that the feed-in premium, which is the European Commission's current scheme of choice, may enhance market power and favor conventional electricity production. It may also reduce the likelihood of achieving the political objective to increase production from renewable energy sources.     

Renewable energy alternatives for developed countries

This paper examines renewable energy alternatives in developed countries: environmental mechanisms; future energy alternatives; green electricity marketing and its potential; pricing; and limitations on the eve of open access. It discusses objectives in electricity restructuring; the role of resources planning in forming long range energy environmental policies; feasibility of electricity trading mechanisms; green marketing in the United States and Australia; green energy offers in Canada; and the results of green pricing programs in Europe and the United States. The role of existing and planned mechanisms to achieve environmental benefits in restructured electricity markets are reviewed. Technological and institutional challenges of achieving real, long-term reductions in carbon dioxide and other emissions from the electric sector are discussed. Factors associated with infrastructure turnover together with technology development and deployment are addressed, where attention is given to policies which promote highly integrated and coordinated reductions in emissions. The paper then focuses on the green pool and trends in power marketing where status of competitive markets, green pricing programs for franchise customers, green power products for contestable customers, credibility of green power marketing, and public policy for renewable energy technologies in competitive markets are discussed. It then reviews green energy in Ontario on the eve of open access, and shows there is a market for green energy if customers have a choice     

Optimizing biogas plants with excess power unit and storage capacity in electricity and control reserve markets

Increasing shares of intermittent power sources such as solar and wind will require biomass fueled generation more variable to respond to the increasing volatility of supply and demand. Furthermore, renewable energy sources will need to provide ancillary services. Biogas plants with excess generator capacity and gas storages can adapt the unit commitment to the demand and the market prices, respectively. This work presents a method of day-ahead unit commitment of biogas plants with excess generator capacity and gas storage participating in short-term electricity and control reserve markets. A biogas plant with 0.6 MW annual average electric output is examined in a case study under German market conditions. For this biogas plant different sizes of the power units and the gas storage are compared in consideration of costs and benefits of installing excess capacity. For optimal decisions depending on prices, a mixed-integer linear programming (MILP) approach is presented.The results show that earnings of biogas plants in electricity markets are increased by additional supplying control reserve. Furthermore, increasing the installed capacity from 0.6 MW to 1 MW (factor 1.7) leads to the best cost–benefit-ratio in consideration of additional costs of excess capacity and additional market revenues. However, the result of the cost–benefit-analysis of installing excess capacity is still negative. Considering the EEG flexibility premium, introduced in 2012 in the German renewable energy sources act, the result of the cost–benefit-analysis is positive. The highest profit is achieved with an increase of the installed capacity from 0.6 MW to 2 MW (factor 3.3).     

Strategies for regional integration of electricity supply in West Africa

To improve peoples’ living conditions in West African countries national governments have to considerably reinforce the electricity supply infrastructures. Rehabilitation of the existing installations and construction of new power generation facilities and transmission lines require substantial resources which are tremendously difficult to raise due to the region's specific economical and political conditions. This paper examines the long-term prospects for integrated development of the regional electricity industry and evaluates its advantages by using PLANELEC-Pro, a “bottom-up” electricity system expansion planning optimisation model. The evolution of regional electricity market is analysed on the basis of two strategies. The “autarkical” strategy consists in adequate expansion of national power generation systems and the exchanges of electricity between the countries in sub-zones. Another approach referred to as “integration” strategy is recommended in this article. It leads to fast retirement of the obsolete power plants and the integration of new investment projects at the level of whole West African sub-region. The main finding is that the regional integration strategy is capable to bring about additional benefits in terms of reduced capital expenditures, lower electricity supply cost and the enhanced system's reliability compared to the autarkical strategy.     

The impact of wind generation on the electricity spot-market price level and variance: The Texas experience

The literature on renewable energy suggests that an increase in intermittent wind generation would reduce the spot electricity market price by displacing high fuel-cost marginal generation. Taking advantage of a large file of Texas-based 15-min data, we show that while rising wind generation does indeed tend to reduce the level of spot prices, it is also likely to enlarge the spot-price variance. The key policy implication is that increasing use of price risk management should accompany expanded deployment of wind generation.     

Liberalisation of the UK energy market: An opportunity for green energy

1998 is a year of considerable change and opportunity for the energy sector in the UK, with government policy reviews of generation, renewables, utility regulation and climate change. In addition, the UK electricity market and gas markets will be opened up to full competition. This could boost renewable energy and the formation of Energy Services Companies as environmentally-aware consumers become able to choose ‘green’ energy from more progressive suppliers. Friends of the Earth has researched the environmental performance of the main electricity suppliers in the UK and the potential for consumer pressure. However, competition must exist within a framework of government regulation and additional support mechanisms if environmental and social objectives for the energy sector are to be met     

Electricity market integration,decarbonisation and security of supply: Dynamic volatility connectedness in the Irish and Great Britain markets

This study investigates the volatility connectedness between the Irish and Great Britain electricity markets and how it is driven by changes in energy policy, institutional structures and political ideologies. We assess various aspects of this volatility connectedness including static (unconditional) vs dynamic (conditional), symmetric vs asymmetric characteristics between 2009 and 2018. We find that the volatility connectedness is time-varying and it is significantly affected by important events, policy reforms or market re-designs such as Brexit, oil price slump, an increasing share of renewables, and fluctuations in the exchange rates. Our asymmetric analysis shows that magnitude of the good volatility connectedness is marginally larger than that of the bad volatility connectedness. Our result suggests that good volatility levels would be even higher once the Irish market adopts the carbon price floor. Therefore, supporting renewable generation by setting an appropriate price of carbon in interconnected wholesale electricity markets will improve market integration.