Quantifying the impacts of national renewable electricity ambitions using a North–West European electricity market model

This work builds a comprehensive North–West European Electricity Market model for the year 2020 and uses it to quantify the impacts of ambitious national renewable electricity targets. The geographical coverage of the model comprises Germany, France, Belgium, Netherlands, Luxemburg, Great Britain and Ireland. The model simulates the electricity market operation for the entire region at half hourly resolution and produces results in terms of electricity prices, cross border flows, emissions and associated total system costs. The impact of two carbon prices is examined within the model. Results highlight the policy challenges that arise when individual Member States formulate renewable energy plans in isolation in the absence of integrated modelling of interconnected regions as cross border power flows play a more significant role in market dynamics especially in the presence of geographically dispersed variable renewable generation sources such as wind and solar. From a policy perspective results suggest that based on these national plans, congestion will be present on a number of key lines at long periods during the year.     

Fruitful symbiosis: Why an export bundled with wind energy is the most feasible option for North African concentrated solar power

The idea of generating electricity in North Africa using concentrating solar thermal power (CSP) has been around for some time now but has recently gained momentum through the Mediterranean Solar Plan (MSP) and the formation of the Desertec Industrial Initiative. This paper argues that while the large-scale deployment of CSP in North Africa does not seem economically attractive for either European or African institutions or countries on their own at present, combining domestic use and electricity exports could be profitable for both parties. A detailed economic portfolio covering both solar and wind power plants can achieve competitive price levels, which would accelerate the diffusion of solar technology in North Africa. This portfolio could be financed partially by exporting electricity from solar thermal plants in North Africa via HVDC interconnections to European consumers. Sharing the costs in this way makes it possible to generate solar electricity for the domestic market at a reasonable cost. Some of the electricity produced from the solar power plants and wind parks in North Africa is sold on European energy markets in the form of a long-term contracted solar–wind portfolio, which would qualify for support from the financial incentive schemes of the European Member States (e.g. feed-in tariffs). This transfer of green electricity could help to meet the targets for energy from renewable energy sources (RES) in the EU Member States as the new EU Directive of 2009 opened the European electricity market to imports from third states.     

Development modes analysis of renewable energy power generation in North Africa

North African countries generally have strategic demands for energy transformation and sustainable development. Renewable energy development is important to achieve this goal. Considering three typical types of renewable energies— wind, photovoltaic (PV), and concentrating solar power (CSP)—an optimal planning model is established to minimize construction costs and power curtailment losses. The levelized cost of electricity is used as an index for assessing economic feasibility. In this study, wind and PV, wind / PV / CSP, and transnational interconnection modes are designed for Morocco, Egypt, and Tunisia. The installed capacities of renewable energy power generation are planned through the time sequence production simulation method for each country. The results show that renewable energy combined with power generation, including the CSP mode, can improve reliability of the power supply and reduce the power curtailment rate. The transnational interconnection mode can help realize mutual benefits of renewable energy power, while the apportionment of electricity prices and trading mechanisms are very important and are related to economic feasibility; thus, this mode is important for the future development of renewable energy in North Africa.     

A nuclear-powered North Africa: Just a desert mirage or is there something on the horizon?

All of the North African countries have plans to develop nuclear power. If successful, nuclear energy could supply up to 9–15% of all electricity consumption in the region by 2030. How realistic are these plans and under what conditions can they be implemented? This paper seeks to answer this question by analyzing the motivations and capacities for deploying nuclear energy in the five North African countries by examining both regional and national factors. These factors are compared to similar characteristics of the countries with existing nuclear power programs using a series of quantitative indicators. While all five countries have strong motivations to develop nuclear power, which result from the high growth rates in demand for electricity and energy security concerns, their financial and institutional capacities to deploy nuclear energy vary and are generally lower than in those countries which already operate nuclear power plants. Most likely, North Africa will need to rely on external assistance to implement its nuclear energy plans. The article identifies three scenarios of nuclear power development from the interplay between internal and external factors, particularly the success of renewable energy projects and the ability to attract international investment in nuclear power.     

Investment decisions in imperfect power markets with hydrogen storage and large share of intermittent electricity

This paper analyzes the impact of hydrogen as energy storage on production and investment decisions in an electricity market when individual participants behave strategically. We develop a game-theoretic model on investment and generation game à la Cournot under the open-loop information structure. This framework is implemented as a mixed complementarity problem and applied to the German case assuming the phase-out of the German nuclear power plants, rising renewable energy supply and increasing energy demand for electric vehicles. The numerical results of our analysis indicate that utilization of energy storage has a positive effect on energy systems with large amount of intermittent electricity and inelastic demand. We find that additional hydrogen storage capacities improve system reliability, increase overall welfare and decrease GHG emissions. Adding demand for hydrogen as a fuel for FCEVs allows for a synergetic use of the technology and changes the investment incentives for energy storage. Although the power-to-gas technology has a price-smoothing effect the overall generation capacity is higher with energy storage providing additional supply security in markets with a large amount of intermittent energy production.     

Renewable energy sources in European energy supply and interactions with emission trading

This paper presents a model-based approach, which allows to determine the optimised structure and operation of the EU-15 electricity supply under different political and economic framework conditions, with a focus on the integration of renewable energy sources for electricity generation (RES-E) in the EU-15 countries. The approach is designed to take into account the characteristics of power production from both renewable and conventional sources, including the technological and economic characteristics of existing plants as well as those of future capacity expansion options. Beyond that, fuel supply structures are modelled, as well as the international markets for power and CO₂-certificates with their restrictions. Thus, a profound evaluation of the exploitation of mid-term renewable potentials and an assessment of the market penetration of the various renewable power generation technologies under the (normative) premise of a cost-optimised evolution of the power system becomes possible. Results show that a promotion of renewable energies reduces the scarcity of CO₂-emission allowances and thus lowers marginal costs of CO₂ reduction up to 30% in 2030. Despite the higher overall costs, a diversification of the energy resource base by RES-E use is observed, as primarily natural gas and nuclear fuels are replaced.     

Analysis of biomass co-firing systems in Taiwan power markets using linear complementarity models

Biomass co-firing systems in power plants generate electric power by the simultaneous combustion of biomass and fossil fuels. The co-firing process reduces investment costs by converting biomass energy into electricity in existing conventional power plants. Biomass co-firing significantly reduces carbon dioxide and sulfur dioxide emissions in power generation. To meet the increase in biomass demand, this paper has considered systematic energy crop production, which is expected to increase in the near future. Our aim is to analyze biomass co-firing systems in the Taiwanese electricity market. In this paper, we study two emerging biomass feedstocks: switchgrass and Miscanthus. We focus on the impact of energy crop co-firing on carbon dioxide and sulfur dioxide emissions for electricity generation. A Nash–Cournot competition model, which simulates potential biomass co-firing scenarios, is formulated for power markets. A case study conducted in the Taiwanese electricity market showed that biomass co-firing lowers total electricity demand and sale. Miscanthus is more economical than switchgrass in terms of the production cost and the land required to generate biopower for the same levels of biomass co-firing.     

Cooperation mechanisms to achieve EU renewable targets

There are considerable benefits from cooperating among member states on meeting the 2020 renewable energy sources (RES) targets. Today countries are supporting investments in renewable energy by many different types of support schemes and with different levels of support. The EU has opened for cooperation mechanisms such as joint support schemes for promoting renewable energy to meet the 2020 targets. The potential coordination benefits, with more efficient localisation and composition of renewable investment, can be achieved by creating new areas/sub-segments of renewable technologies where support costs are shared and credits are transferred between countries.Countries that are not coordinating support for renewable energy might induce inefficient investment in new capacity that would have been more beneficial elsewhere and still have provided the same contribution to meeting the 2020 RES targets. Furthermore, countries might find themselves competing for investment in a market with limited capital available. In both cases, the cost-efficiency of the renewable support policies is reduced compared to a coordinated solution.Barriers for joint support such as network regulation regarding connection of new capacity to the electricity grid and cost sharing rules for electricity transmission expansion are examined and examples given. The influence of additional renewable capacity on domestic/regional power market prices can be a barrier. The market will be influenced by for example an expansion of the wind capacity resulting in lower prices, which will affect existing conventional producers. This development will be opposed by conventional producers, whereas consumers will support such a strategy.A major barrier is the timing of RES targets and the uncertainty regarding future targets. We illustrate the importance of different assumptions on future targets and the implied value of RES credits. The effect on the credit price for 2020 is presented in an exemplary case study of 200 MW wind capacity.     

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.     

Cost effects of international trade in meeting EU renewable electricity targets

The European market for renewable electricity received a major stimulus from the adoption of the Directive on the Promotion of Renewable Electricity. The Directive specifies the indicative targets for electricity supply from renewable energy sources (RES-E) to be reached in European Union (EU) Member States in the year 2010. It also requires Member States to certify the origin of their renewable electricity production. This article presents a first EU-wide quantitative evaluation of the effects of meeting the targets, using an EU-wide system for tradable green certificates (TGC). We calculate the equilibrium price of green certificates and identify which countries are likely to export or import certificates. Cost advantages of participating in such an EU-wide trading scheme are determined for each of the Member States. Moreover, we identify which choice of technologies results in meeting targets at least costs. Results are obtained from a model that quantifies the effects of achieving the RES-E targets in the EU with and without trade. The article provides a brief insight in this model as well as the methodology that was used to specify cost potential curves for renewable electricity in each of the 15 EU Member States. Model calculations show that within the EU-wide TGC system, the total production costs of the last option needed to satisfy the overall EU RES-E target equals 9.2 eurocent/kWh. Assuming that the production price of electricity on the European power market would equal 3 eurocent/kWh in the year 2010, the indicative green certificate price equals 6.2 eurocent/kWh. We conclude that implementation of an EU-wide TGC system is a cost-efficient way of stimulating renewable electricity supply.     

Advanced mechanisms for the promotion of renewable energy—Models for the future evolution of the German Renewable Energy Act

The German Renewable Energy Act (EEG) has been very successful in promoting the deployment of renewable electricity technologies in Germany. The increasing share of EEG power in the generation portfolio, increasing amounts of fluctuating power generation, and the growing European integration of power markets governed by competition calls for a re-design of the EEG. In particular, a more efficient system integration and commercial integration of the EEG power is needed to, e.g. better matching feed-in to demand and avoiding stress on electricity grids. This article describes three different options to improve the EEG by providing appropriate incentives and more flexibility to the promotion mechanism and the quantitative compensation scheme without jeopardising the fast deployment of renewable energy technologies. In the “Retailer Model”, it becomes the responsibility of the end-use retailers to adapt the EEG power to the actual demand of their respective customers. The “Market Mediator Model” establishes an independent market mediator responsible to market the renewable electricity. This model is the primary choice when new market entrants are regarded as crucial for the better integration of renewable energy and enhanced competition. The “Optional Bonus Model” relies more on functioning markets since power plant operators can alternatively choose to market the generated electricity themselves with a premium on top of the market price instead of a fixed price.     

How do energy & environmental policy goals and instruments affect electricity demand? A framework for the analysis

Several measures in the environment and energy realms are currently being implemented in the EU and its Member States. Three of these instruments, with an impact on the electricity market, are demand side management activities, promotion of electricity from renewable energy sources and measures aimed at the mitigation of Greenhouse Gas (GHG) emissions. The objective of this paper is to analyse the impact of these energy efficiency and environmental goals and instruments on electricity demand and costs to electricity consumers when electricity markets are either national or international and when those policies are implemented by a national or an international institution. The paper shows that the effectiveness and impact of those measures largely depends on the demand response in the electricity market. An additional conclusion is that, when either the electricity markets or the support policies are national, distortions may occur, i.e. the reductions in electricity demand in one country may be subsidised by consumers or taxpayers in another country.     

Do Intermittent Renewables Threaten the Electricity Supply Security?

Around the globe, intermittent renewable energies in the form of wind and solar power are on the rise. Their subsidization can be seen as a market intervention, which may deter optimal investment. Thus, this study tests the effect of renewable energies on investment in conventional electricity generation technologies. We estimate a dynamic investment model for 14 European economies for the period 2004–2016 and find a non-negligible negative impact of intermittent renewables on investment in peak-load capacity (mainly gas), while base-load (particularly coal) plants are unaffected. However, the production flexibility of gas-fired plants represents a particularly vital function to balance the supply intermittency of wind and solar. Thus, dispatchable conventional power plants are still necessary to back the system under scarcity events, such as unfavorable weather conditions during high electricity demand. Policymakers should be aware of the adverse effects of RES on investment in peak-load plants and may consider a redesign of the current system, for example by introducing capacity markets.     

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.     

Investment in wind power and pumped storage in a real options model

Promoting renewable energy has been a key ingredient in energy policy seeking to de-carbonize the energy mix and will continue to do so in the future given the European Union's high ambitions to further curb carbon emissions. A wide range of instruments has been suggested and implemented in various countries of the EU. A prominent policy promoting investment in renewable technologies is the use of feed-in tariffs, which has worked well at large scale in, e.g. Germany, but which has only been implemented in a very limited way in countries such as the UK.Being subject to environmental uncertainties, however, renewables cannot be seen in isolation: while renewables-based technologies such as wind and solar energy, for example, suffer from uncertain loads depending on environmental conditions, hydropower allows for the storage of water for release at peak prices, which can be treated as a premium (partially) offsetting higher upfront investment costs. In addition, electricity prices will respond to changes in electric capacity in the market, which is often neglected in standard investment models of the electricity sector.This paper contributes to the existing literature in two ways: it provides a review of a renewables-based technology in a specific policy context and provides additional insight by employing a real options approach to investigate the specific characteristics of renewables and their associated uncertainties in a stylized setting taking explicitly into account market effects of investment decisions. The prices of the model are determined endogenously by the supply of electricity in the market and by exogenous electricity price uncertainty. The inclusion of market effects allows us to capture the full impact of public incentives for companies to invest into wind power and hydro pumped storage installations.     

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.     

Green energy market development in Germany: effective public policy and emerging customer demand

This paper reviews the development of renewable energy in Germany from 1973 to 2003. It investigates the relative importance of energy policy and green power marketing in shaping the renewable energy market. More than a decade of consistent policy support for renewables under the feed-in law (StrEG) and its successor (EEG) has been an important driver for increasing renewable electricity generation to date, putting the country in a better position than most of its peers when it comes to achieving European Union targets for renewable energy. Green power marketing driven by customer demand, on the other hand, is growing, but has had limited measurable impact so far. We discuss potential intangible benefits of green power marketing and scenarios for future market development. The paper concludes with lessons that can be learned from the German case for policy design and market development in other countries.     

The impact of wind power support schemes on technology choices

In energy systems with large shares of variable renewable energies, electricity generation is lower during unfavorable weather conditions. System-friendly wind turbines (SFTs) rectify this by producing a larger share of their electricity at low wind speeds. This paper analyzes to what extent SFTs' benefits out-weigh their additional costs and how to incentivize investments into them. Using a wind power investment model for Germany, I show that SFTs indeed deliver benefits for the energy system that over-compensate for their cost premium. Floating market premium schemes incentivize their deployment only where investors bear significant price risks and possess sufficient foresight. Alternatively, a new production value-based benchmark triggers investors to install SFTs that meet the requirements of power systems with increasing shares of variable renewable energies.     

Spanish energy roadmap to 2020: Socioeconomic implications of renewable targets

The European Union has established challenging targets for the share of renewable energies to be achieved by 2020; for Spain, 20% of the final energy consumption must be from renewable sources at such time. The aim of this paper is the analysis of the consequences for the electricity sector (in terms of excess cost of electricity, investment requirements, land occupation, CO₂ emissions and overcapacity of conventional power) of several possibilities to comply with the desired targets. Scenarios are created from different hypotheses for energy demand, biofuel share in final energy in transport, contribution of renewables for heating and cooling, renewable electricity generation (generation mix, deployment rate, learning curves, land availability) and conventional power generation (lifetime of current installations, committed deployment, fossil fuel costs and CO₂ emissions cost). A key input in the estimations presented is the technical potential and the cost of electricity from renewable sources, which have been estimated in previous, detailed studies by the present authors using a methodology based on a GIS (Geographical Information System) and high resolution meteorological data. Depending on the scenario, the attainment of the targets will lead to an increase in the cost of electricity from 19% to 37% with respect to 2007.     

Role of the GB-France electricity interconnectors in integration of variable renewable generation

The integration of large capacities of wind and solar generation into the France and Great Britain (GB) power systems is expected to pose significant operational challenges. Electricity interconnectors can play a role in facilitating the integration of renewable generation in neighbouring countries by allowing power to flow freely between power systems and therefore smooth the net electricity demand. In this paper, role of the electricity interconnectors in efficient balancing of supply and demand in the France and GB power systems was evaluated in terms of overall reduction in the operational costs and curtailment of renewable generation, and also its impact on operation of gas-fired plants. The value of the France-GB interconnectors was studied for two generation mix scenarios in 2030 using PLEXOS. The outputs of the modelling showed the interconnectors will result in larger amount of wind and solar to be absorbed by both power systems which consequently will reduce overall operational costs and CO₂ emissions. In addition, the interconnectors will reduce burden on gas-fired plants compensating for variation in wind and solar generation. This can have a significant value in operation and required investment of gas networks in both countries.