Resource Adequacy with Increasing Shares of Wind and Solar Power: A Comparison of European and U.S. Electricity Market Designs

Audun Botterud and Hans Auer

Economics of Energy & Environmental Policy, 2020, vol. Volume 9, issue Number 2

Abstract: We raise the question if improvements to current energy-only markets are sufficient to maintain resource adequacy in electricity markets or whether the rapid increase in wind and solar power gives stronger arguments for additional capacity mechanisms. A comparative analysis between Europe and the United States reveals some fundamental differences, but also many similarities in electricity market design on the two continents. We provide a list of general and specific recommendations for improved electricity markets and argue that lessons can and should be learned in both directions. The key to achieve a market-compatible integration of renewable energy is to focus on correct price formation in the short-term. Increased demand-side participation, improved pricing during scarcity conditions, and a transition from technology-specific subsidies of renewables towards adequate pricing of carbon emissions are important measures towards this end. In contrast, an increasing reliance on administrative capacity mechanisms would bring the industry back towards the centralized integrated resource planning that prevailed at the outset of electricity restructuring more than 25 years ago.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.iaee.org/en/publications/eeeparticle.aspx?id=329 (text/html)
Access to full text is restricted to IAEE members and subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aen:eeepjl:eeep9-2-botteru

Ordering information: This journal article can be ordered from
http://www.iaee.org/ ... ons/eeepjournal.aspx

Access Statistics for this article

More articles in Economics of Energy & Environmental Policy from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().