The transition of the electricity system towards decarbonization: the need for change in the market regime

Dominique Finon
Additional contact information
Dominique Finon: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: The mainstream community of energy experts is not aware of the long-term impacts that carbon policies directly concerned with promoting the development of low-carbon technologies produce on the electricity market regime. Long-term market coordination should be replaced by public coordination with long-term arrangements. The current market coordination makes carbon pricing ineffective in orienting investors towards capital-intensive low-carbon technologies. Fossil fuel generation technologies are preferred because their investment risks are much lower in the market regime, even with a high but unstable carbon price. Thus, in order to avoid delaying investment that is aimed at the decarbonization of the electricity system, a number of new market arrangements that lower the investment risk of low-carbon technologies and provide output-based subsidization have or are being selected by governments. As the use of low-carbon equipment to produce electricity develops, long-term market coordination for other technologies (e.g. peaking units, combined cycle gas turbine) will fade away because they alter the market price setting. Thus it is likely that, in the future, public coordination and planning will replace the decisions of market players not only for low-carbon technologies but also for every other type of capacity development.

Date: 2013-01-31
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Published in Climate Policy, 2013, 13 (S01), pp.131-146. ⟨10.1080/14693062.2012.741832⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-00834866

DOI: 10.1080/14693062.2012.741832

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().