Redistribution Effects Resulting from Cross-Border Cooperation in Support for Renewable Energy

Michaela Unteutsch
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Michaela Unteutsch: Energiewirtschaftliches Institut an der Universitaet zu Koeln

No 2014-1, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: It has been shown that international cooperation in achieving renewable energy targets, e.g., via a common tradable green certi ficate market, increases overall welfare. However, cooperation in the support of electricity from renewable energy sources also leads to regional price effects, from which some groups benefit while others lose. On a regional level, the introduction of cross-border cooperation in RES-E support generally has an opposite effect on support expenditures and wholesale electricity prices, as long as grid congestion between the diff erent regions exists. In this paper, a theoretical model is used to analyze under which conditions different groups benefi t or suff er from the introduction of cooperation. Findings of the analysis include that eff ects on consumers and total producers per country can only be clearly determined if no grid congestions between the countries exist. If bottlenecks in the transmission system exist, the relationship between the slopes of the renewable and the non-renewable marginal generation cost curves for electricity generation as well as the level of the RES-E target essentially determine whether these groups benefi t or lose from the introduction of green certi ficate trading. In contrast, system-wide welfare always increases once cooperation in RES-E support is introduced. Similarly, welfare on the country level always increases (compared to a situation without RES-E cooperation) if the countries are perfectly or not at all physically interconnected. In the case of congested interconnectors, each country always at least potentially benefi ts from the introduction of certi ficate trade, taking into account possible distributions of congestion rents between the countries.

Keywords: Cooperation Mechanisms; Tradable Green Certificates; Welfare; Consumer Rent; Producer Profit (search for similar items in EconPapers)
JEL-codes: F19 Q28 Q40 Q48 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-01-14
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:2014_001

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