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Decarbonizing Electricity Generation with Intermittent Sources of Energy

Stefan Ambec and Claude Crampes ()

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Abstract: We examine policy instruments that aim to decarbonize electricity production by replacing fossil fuel energy with intermittent renewable sources, namely, wind and solar power. We consider a model of investment, production, and storage with two sources of energy: one is clean but intermittent (wind or solar), whereas the other one is reliable but polluting (thermal power). We first determine the first-best energy mix depending on the social cost of polluting emissions. We then show that, to implement the socially efficient energy mix without a carbon tax, feed-in tariffs and renewable portfolio standards must be complemented with a price cap and volume-limited capacity payments.

Keywords: intermittency; renewables; electricity; storage; feed-in tariff; carbon emissions (search for similar items in EconPapers)
Date: 2019
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Published in Journal of the Association of Environmental and Resource Economists, 2019, 6 (6), pp.919-948. ⟨10.1086/705536⟩

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DOI: 10.1086/705536

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