Why is Germany’s energy transition so expensive? Quantifying the costs of wind-energy decentralisation

Thorsten Engelhorn and Felix Müsgens

Resource and Energy Economics, 2021, vol. 65, issue C

Abstract: This paper discusses the efficiency of promotion schemes for renewable energy sources using the example of onshore wind energy in Germany. We analyse whether the scheme incentivised a cost-minimal capacity build-up by developing a model to derive two cost-minimal benchmark scenarios, which are then compared to the historical capacity build-up between 1995 and 2015. The costs of the two cost-minimising benchmark scenarios are significantly lower than those of the historical build-up. The benchmark cost reduction largely stems from greater efficiency—fewer turbines are being constructed overall but they are being placed at better wind sites so the annual production of wind energy remains unchanged. Hence, aggregated turbine land use is also significantly down in these scenarios. Furthermore, we compare costs for consumers, as protecting consumers from price discrimination of producers is sometimes used to justify higher payments for low-wind sites. However, our results show that the efficiency gain from building at high wind sites outweighs the distributional effect, even from a consumer’s perspective.

Keywords: Wind power; Energy policy; Support scheme; Market design; Cost minimisation; Efficiency (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:65:y:2021:i:c:s0928765521000269

DOI: 10.1016/j.reseneeco.2021.101241

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