Impact of dynamic pricing on investment in renewables

Joao Correia-da-Silva, Isabel Soares and Raquel Fernández

Energy, 2020, vol. 202, issue C

Abstract: We consider a theoretical model in which non-regulated producers may use renewable and non-renewable sources to produce electricity. Renewable sources require ex ante investment and generate uncertain output with no operating costs. Non-renewable sources do not require investment (existing capacity suffices), are dispatchable, and have linear operating costs. Producers may: use only non-renewables; use renewables and dispatch non-renewables when weather is adverse for renewables; use only renewables. Dynamic pricing has no effect on the introduction of renewables in the production mix, but promotes elimination of non-renewables. Dynamic pricing increases investment in renewables if, under static pricing, producers mix both sources; and reduces investment if, under static pricing, producers only use renewables. In both cases, dynamic pricing improves welfare as consumers and producers become better off.

Keywords: Electricity market; Dynamic pricing; Investment in renewables (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:202:y:2020:i:c:s0360544220308021

DOI: 10.1016/j.energy.2020.117695

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