High Taxes on Cloudy Days: Dynamic State-Induced Price Components in Power Markets

Leonard Göke () and Reinhard Madlener
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Leonard Göke: RWTH Aachen University, Postal: Templergraben 55, 52056 Aachen, Germany, http://www.rwth-aachen.de/

No 18/2017, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: In most European countries, taxes and levies, the state-induced components of electricity prices, constitute the major share of electricity prices for consumers and are charged at a fixed rate. This study analyzes whether switching stateinduced price components to time varying rates can support the integration of variable renewables (VRE) and, thus, help to efficiently achieve the overarching goal of decarbonizing the energy system. Based on game theory and linear programming, we introduce a novel simulation model of the power market. For a quantitative case study, the model is parametrized to represent a German energy system that meets the political objective to increase the share of renewables (RE) in power generation to 80% in 2050. We find that dynamization supports the integration of VRE into the energy system. Whether dynamization is an efficient instrument to promote decarbonization as well is highly dependent on the policy framework in place.

Keywords: Dynamization; Climate policy; Variable renewables; Integration costs; Welfare analysis; Energy market model (search for similar items in EconPapers)
JEL-codes: C61 C63 C70 Q42 Q48 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2017-12, Revised 2020-05-01
New Economics Papers: this item is included in nep-cmp and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:fcnwpa:2017_018

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