System Costs of Variable Renewable Energy in the European Union

Thibault Roy
Additional contact information
Thibault Roy: European Commission

No 37, Bruges European Economic Policy Briefings from European Economic Studies Department, College of Europe

Abstract: To shift to a low-carbon economy, the EU has been encouraging the deployment of variable renewable energy sources (VRE). However, VRE lack of competitiveness and their technical specificities have substantially raised the cost of the transition. Economic evaluations show that VRE life-cycle costs of electricity generation are still today higher than those of conventional thermal power plants. Member States have consequently adopted dedicated policies to support them. In addition, Ueckerdt et al. (2013) show that when integrated to the power system, VRE induce supplementary not-accounted-for costs. This paper first exposes the rationale of EU renewables goals, the EU targets and current deployment. It then explains why the LCOE metric is not appropriate to compute VRE costs by describing integration costs, their magnitude and their implications. Finally, it analyses the consequences for the power system and policy options. The paper shows that the EU has greatly underestimated VRE direct and indirect costs and that policymakers have failed to take into account the burden caused by renewable energy and the return of State support policies. Indeed, induced market distortions have been shattering the whole power system and have undermined competition in the Internal Energy Market. EU policymakers can nonetheless take full account of this negative trend and reverse it by relying on competition rules, setting-up a framework to collect robust EU-wide data, redesigning the architecture of the electricity system and relying on EU regulators.

Keywords: Variable renewable energy; Integration costs; Distortion costs; EU electricity system; System costs (search for similar items in EconPapers)
JEL-codes: L51 L94 O52 Q20 Q42 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-12
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.coleurope.eu/system/files_force/resear ... p37_0.pdf?download=1 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:coe:wpbeep:37

Access Statistics for this paper

More papers in Bruges European Economic Policy Briefings from European Economic Studies Department, College of Europe Contact information at EDIRC.
Bibliographic data for series maintained by Jessie Moerman ( this e-mail address is bad, please contact ).