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Electricity provision with intermittent sources of energy

Stefan Ambec and Claude Crampes ()

Resource and Energy Economics, 2012, vol. 34, issue 3, 319-336

Abstract: We analyze the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first characterize the optimal energy mix, emphasizing the availability of the intermittent source as a major parameter for the optimal investment in capacity. We then analyze decentralization through competitive market mechanisms. We show that decentralizing the efficient energy mix requires electricity to be priced contingently on the availability of the intermittent source. By contrast, traditional meters impose uniform pricing, which distorts the optimal mix of energy sources. Decentralizing the efficient energy mix with uniform prices requires either cross-subsidies from the intermittent source to the reliable source of energy or structural integration of the two types of technology.

Keywords: Renewable resources; Wind electricity; Solar energy; Global warming (search for similar items in EconPapers)
JEL-codes: D24 D61 Q27 Q32 Q42 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:34:y:2012:i:3:p:319-336

DOI: 10.1016/j.reseneeco.2012.01.001

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