Flexibility in Europe's power sector — An additional requirement or an automatic complement?
Christian Growitsch (),
Stefan Lorenczik and
Energy Economics, 2016, vol. 53, issue C, 118-131
By 2050, the European Union aims to reduce greenhouse gases by more than 80%. The EU member states have therefore declared to strongly increase the share of renewable energy sources (RES-E) in the next decades. Given a large deployment of wind and solar capacities, there are two major impacts on electricity systems: First, the electricity system must be flexible enough to cope with the volatile RES-E generation, i.e., ramp up supply or ramp down demand on short notice. Second, sufficient back-up capacities are needed during times with low feed-in from wind and solar capacities. This paper analyzes whether there is a need for additional incentive mechanisms for flexibility in electricity markets with a high share of renewables. For this purpose, we simulate the development of the European electricity markets up to the year 2050 using a linear investment and dispatch optimization model. Flexibility requirements are implemented in the model via ramping constraints and provision of balancing power. We found that an increase in fluctuating renewables has a tremendous impact on the volatility of the residual load and consequently on the flexibility requirements. However, any market design that incentivizes investments in least (total system) cost generation investment does not need additional incentives for flexibility. The main trigger for investing in flexible resources is the achievable full load hours and the need for backup capacity. In a competitive market, the cost-efficient technologies that are most likely to be installed, i.e., gas-fired power plants or flexible CCS plants, provide flexibility as a by-product. Under the condition of system adequacy, flexibility never poses a challenge in a cost-minimal capacity mix. Therefore, any market design incentivizing investments in efficient generation thus provides flexibility as an inevi complement.
Keywords: Electricity; Power plant fleet optimization; Renewable energy; Flexibility; Market design (search for similar items in EconPapers)
JEL-codes: C61 C63 Q40 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (20) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Flexibility in Europe's Power Sector - an Additional Requirement or an Automatic Complement? (2013)
Working Paper: Flexibility in Europe's power sector - an additional requirement or an automatic complement? (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:53:y:2016:i:c:p:118-131
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant
More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().