Contracting Matters: Hedging Producers and Consumers with a Renewable Energy Pool

Karsten Neuhoff, Fernanda Ballesteros, Mats Kröger and Jörn C. Richstein

No 2035, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Renewable energy installations are rapidly gaining market share due to falling technology costs and supportive policies. Meanwhile, the energy price crisis resulting from the Russian-Ukrainian war has shifted the energy policy debate toward the question of how consumers can benefit more from the low and stable generation costs of renewable electricity. Here we suggest a Renewable Pool (“RE-Pool”) under which the government passes the conditions of Contracts-for-Difference on to consumers who thereby benefit from reliably low-cost electricity supply. We assess the effect on financing costs, scale, and system friendliness of wind investments, as well risk hedging for consumers’ volume risks and hedging incentives.

Keywords: Contracts-for-Difference; renewable policy; electricity markets; financing; PPA (search for similar items in EconPapers)
JEL-codes: D44 D47 G32 L94 (search for similar items in EconPapers)
Pages: 26 p.
Date: 2023
New Economics Papers: this item is included in nep-cis, nep-cta, nep-des, nep-ene, nep-env, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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