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Electricity Provision with Intermittent Sources of Energy

Stefan Ambec () and Claude Crampes ()
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Stefan Ambec: LERNA - Economie des Ressources Naturelles - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives, IDEI - TSE - Toulouse School of Economics, Göteborg University

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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: wind electricity; renewable resource; solar energy; global warming; renewable energy; solar power; énergie renouvelable; énergie solaire (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02118109
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Published in Resource and Energy Economics, Elsevier, 2012, 34 (3), pp.319-336. ⟨10.1016/j.reseneeco.2012.01.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02118109

DOI: 10.1016/j.reseneeco.2012.01.001

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