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Carbon Price instead of Support Schemes: Wind Power Investments by the Electricity Market

Marie Petitet, Dominique Finon, and Tanguy Janssen
Authors registered in the RePEc Author Service: Marie PETITET

The Energy Journal, 2016, vol. Volume 37, issue Number 4

Abstract: This paper studies wind power development within electricity markets with a significant carbon price as the sole incentive. Simulation of electricity market and investment decisions by System Dynamics modelling is used to trace the evolution of the electricity generation mix over a 20-year period from an initially thermal system. A range of carbon prices is tested to determine the value above which market-driven development of wind power becomes economically possible. This requires not only economic competitiveness in terms of cost-price, but also profitability versus traditional fossil-fuel technologies. Results stress that wind power is profitable for investors only if the carbon price is significantly higher than the price required for making wind power MWh's cost-price competitive on the basis of levelized costs. In this context, the market-driven development of wind power seems only possible if there is a strong commitment to climate policy, reflected in a stable and high carbon price. Moreover, market-driven development of wind power becomes more challenging if nuclear is part of investment options.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2016
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Related works:
Working Paper: Carbon price instead of support schemes: Windpower investments by the electricity markets (2015)
Working Paper: Carbon price instead of support schemes: Windpower investments by the electricity markets (2015)
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