 Renewable Electricity and Backup Capacities: An (Un-) Resolvable Problem?Aaron Praktiknjo and Georg Erdmann
The Energy Journal, 2016, vol. Volume 37, issue Bollino-Madlener Special Issue Abstract: Public support for renewables has led to an unexpected investment momentum in Germany. A consequence is a reduction in wholesale electricity prices, the so-called merit order effect of renewables. We estimate this reduction using an econometric approach and provide a quantitative overview of the financial situation of conventional generators. Our results indicate that investments in new conventional capacities are economically unviable. With the current market design, this situation is going to impact supply security, at least in the long run. A popular approach to address this issue is the introduction of additional public support for conventional power plants. However, we believe that subsidizing renewable and conventional capacities contradicts the idea of a liberal market. We present two alternatives: State control of investments in renewables through auctions (as proposed by the European Commission), and a premium paid to representatives of the demand side (such as retailers) in dependence of their shares of renewables. JEL-codes: F0 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:ej37-si2-praktiknjo Ordering information: This journal article can be ordered from Access Statistics for this article More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC. |
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