Electricity interconnection with intermittent renewables

Yuting Yang

Journal of Environmental Economics and Management, 2022, vol. 113, issue C

Abstract: Electricity interconnection has been recognized as a way to mitigate carbon emissions by dispatching more efficient electricity production and accommodating the growing integration of renewables. I analyze the impact of electricity interconnection in the presence of intermittent renewables, such as wind and solar power, on the equilibrium energy mix and carbon emissions under a Pigouvian carbon price using a two-country model. I find that interconnection decreases investments in renewable capacity and exacerbates carbon emissions if the carbon price is low. Conversely, interconnection increases renewable capacity and reduces carbon emissions for a high carbon price. Moreover, I identify the insurance benefit of increased interconnection and how it depends on the correlation of renewables in the two countries. I calibrate the model using data from the European Union electricity market and simulate expanding interconnection between Germany–Poland and France–Spain. The simulation shows that achieving the EU2030 interconnection target increases total carbon emissions at a carbon price of 100€/tCO2.

Keywords: Intermittent renewables; Electricity interconnection; Trade and environment; Carbon emissions (search for similar items in EconPapers)
JEL-codes: D61 F18 Q27 Q48 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 (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:113:y:2022:i:c:s0095069622000328

DOI: 10.1016/j.jeem.2022.102653

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