 Price vs. quantity regulation of volatile energy supply and market entry of RES-E operatorsDaiju Narita and Till Requate Energy Economics, 2021, vol. 101, issue C Abstract: This paper compares price stabilization (such as feed-in tariffs) versus quantity-based policies in supporting the deployment of renewable energy sources to produce electricity (RES-E) under uncertainty. We challenge a widespread view among RES-E supporters claiming that price stabilization provides more investment security and therefore triggers more market entry than free market price fluctuation. Setting up a model with volatile cost or quantity of both conventional electricity production and RES-E, we find that a price stabilization scheme brings about a lower producer surplus for RES-E firms and less RES-E market entry when price fluctuation is induced by the conventional firms’ cost volatility. The opposite holds when the fluctuation results from RES-E firms’ cost or output shocks. With respect to welfare, the second-best quantity policy through a RES-E capacity target always outperforms the second-best policy of price stabilization. Keywords: Electricity market; Renewable energy sources to produce electricity (RES-E); Cost uncertainty; Feed-in-tariff; Capacity policy; Market entry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:101:y:2021:i:c:s0140988321003182 DOI: 10.1016/j.eneco.2021.105425 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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