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Market designs for a 100% renewable energy system: Case isolated power system of Israel

Olga Weiss, Dmitry Bogdanov, Kaisa Salovaara and Samuli Honkapuro

Energy, 2017, vol. 119, issue C, 266-277

Abstract: This paper examines market design options for a 100% renewable energy system taking a behavioral simulation approach. Various market models are tested to understand whether the current energy only market design is suitable to provide investment incentives and operate the 100% RES reliably and economically, or whether an additional capacity remunerative mechanism might be needed. Markets are analyzed with respect to the short-term operation of the technologies and the long-term development of the generation mixes in the 100% RES, and compared in terms of reliability and costs for the consumers. The results indicate that with the energy only market design, it is possible to solve the cost recovery and investment incentive problem in the 100% RES if market prices take account of the opportunity costs of flexible resources. A capacity mechanism may be needed to reduce the risk of underinvestment in flexible resources. The 100% RES system will require markets to accommodate the operational specifics of renewable energy generation. Therefore, the feasibility of radical market designs should be considered when analyzing the market design options for 100% RES systems.

Keywords: Market design; 100% renewable energy system; Capacity markets (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:energy:v:119:y:2017:i:c:p:266-277