Separating electricity from gas prices through Green Power Pools: Design options and evolution

Michael Grubb, Paul Drummond and Serguey Maximov
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Paul Drummond: University College London, Institute of Sustainable Resource
Serguey Maximov: University College London, Institute of Sustainable Resource

No inetwp193, Working Papers Series from Institute for New Economic Thinking

Abstract: This paper develops a detailed proposal for an efficient way to channel the value of large-scale renewables, which have become much cheaper than gas-driven wholesale electricity prices, to consumers at 'cost-plus' prices. This would reduce the fiscal pressure on governments for market-wide subsidies and offer more stable support for consumers most in need. We detail how this 'green power pool' approach could interact with the wholesale market to ensure firm power, also bringing transparency to the cost of balancing the variable renewables output, and maintaining incentives for efficient supply and demand responses. We illustrate the approach with reference to the cost and volume trajectories of UK renewables backed by government CfDs, targeted initially to particular consumer groups, as a first step in a wider transition towards direct consumer access to cheap renewables.

Keywords: Electricity market design; energy crisis; renewable energy; CfD; long-run contracts; energy transition; energy poverty (search for similar items in EconPapers)
JEL-codes: L16 L51 L94 L98 Q28 Q4 Q58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-11-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp193

DOI: 10.36687/inetwp193

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