High renewable electricity penetration: Marginal curtailment and market failure under “subsidy-free” entry

David M Newbery

Energy Economics, 2023, vol. 126, issue C

Abstract: Ambitious plans to decarbonize electricity will require high levels of variable renewable electricity (VRE). At high VRE penetration, the surplus that cannot be exported must be curtailed (spilled). The last MW of wind capacity will be curtailed 3＋times more hours than the average, but even in efficiently designed markets, price signals for VRE investment are given by average, not marginal, curtailment, creating a “tragedy of the commons” that requires a corrective charge to restore efficiency. The paper sets out an analytical model calibrated to Ireland in 2026, showing the source of this distortion and estimates of its magnitude.

Keywords: Renewable electricity; Marginal wind curtailment; Integration costs; market failures; Inertia chargesbreak (search for similar items in EconPapers)
JEL-codes: H23 L94 Q28 Q42 Q48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323005091

DOI: 10.1016/j.eneco.2023.107011

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