The effects of high penetrations of renewable energy sources in cycles for electricity markets: An experimental analysis

Jessica Arias-Gaviria, Santiago Arango-Aramburo and Alberto Lamadrid

Energy Policy, 2022, vol. 166, issue C

Abstract: Long-term capacity cycles in electricity markets are a challenge to policy makers, bringing instability in energy prices, and jeopardizing security of supply. There is evidence of capacity cycles in electricity markets using conventional technologies from empirical data, experimental work and simulation studies. In this article we study the effects of the availability of new technologies on the investment cycles observed, using economic experiments performed in a laboratory setting. We consider the decision making process with a new technology that has shorter construction delays, shorter lifetime and an alternative cost structure, compared to the conventional technologies previously studied. Our experimental design follows the current trends to de-carbonize electricity production by introducing variable renewable energy sources (VRES) as part of the generation portfolio. We find that the introduction of VRES does not dampen the capacity oscillations observed. In fact, the shorter delays in construction and technology lifetimes create shorter, more frequent cycles. We provide recommendations to manage the increased cyclical nature in the transition to a low carbon economy.

Keywords: System dynamics; Capacity cycles; Renewable energy; Experiments (search for similar items in EconPapers)
JEL-codes: C7 L94 O13 Q4 Q5 Q54 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:166:y:2022:i:c:s0301421522002397

DOI: 10.1016/j.enpol.2022.113014

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