Optimal location of renewable power
Cathrine Hagem () and
Energy, 2018, vol. 147, issue C, 1203-1215
A decarbonization of the energy sector calls for large new investments in renewable energy production, and several countries stimulate renewable energy production through economic instruments, such as feed-in premiums or other kinds of subsidies. When choosing the location for increased production capacity, the producer has typically limited incentives to take fully into account the investments costs of the subsequent need for increased grid capacity. This may lead to inefficient choices of location. We explore analytically the design of feed-in premiums that secure an optimal coordinated development of the entire electricity system. We show that with binding electricity transmission constraints, feed-in premiums should differ across locations. By the use of a numerical energy system model (TIMES), we investigate the potential welfare cost of a non-coordinated development of grids and wind power production capacity in the Norwegian energy system. Our result indicates that grid investment costs can be substantially higher when the location decision is based on uniform feed-in premiums compared with geographically differentiated premiums However, the difference in the sum of grid investment cost and production cost is much more modest, as location based on uniform feed-in premiums leads to capacity increase in areas with better wind conditions.
Keywords: Energy policy; Renewable targets; Wind power; Location of renewable energy production; Feed-in premiums; JEL classification: Q42; Q48; Q58 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Optimal location of renewable power (2017)
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:energy:v:147:y:2018:i:c:p:1203-1215
Access Statistics for this article
Energy is currently edited by Henrik Lund and Mark J. Kaiser
More articles in Energy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().