Optimal and Equilibrium Investment in the Intermittent Generation Technologies

Sébastien Rouillon

Revue d'économie politique, 2015, vol. 125, issue 3, 415-452

Abstract: The paper analyses the development of the intermittent technologies to generate electricity, given the competition of incumbent generators using the conventional technologies. Various assumptions are considered regarding the market power of the incumbent generators. The paper shows that an optimal investment in the intermittent technologies can be implemented under perfect competition, provided that a complete system of competitive spot and forward markets exists. By constrast, if a single incumbent firm owns the conventional generators and has market power, the paper shows that the investment in the intermittent technologies will in general be inappropriate. If the conventional and the intermittent generators compete on the the spot and forward markets, the competitive fringe will invest too much in the intermittent technologies, if a large fraction of the consumers are on smart meters and intervene on the spot market. However, if the incumbent firm owns the transmission and distribution network, implying that the intermittent generators can only sell their electricity to the incumbent firm, the intermittent generators will not invest enough in the intermittent technologies.

Keywords: Capacity choice; electricity; intermittency; renewable energy; market power (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (16)

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