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Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany

Lena Schreiner () and Reinhard Madlener ()
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Lena Schreiner: RWTH Aachen University, Postal: RWTH Aachen University, Templergraben 55, 52056 Aachen, Germany, https://www.rwth-aachen.de

No 11/2019, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: This paper provides an approach to incorporate planned investments in power grid infrastructure in Germany, which intend to provide the necessary flexibility to integrate large shares of variable renewable energy sources into the power system, into a dynamic stochastic equilibrium model. Since the investments’ economic impact remains unclear, this paper sheds light on two questions: Do power grid infrastructure investments in Germany have the potential to positively impact economic performance, particularly GDP and employment? Is power grid infrastructure investment an efficient way to provide flexibility to the electricity system? We find the potential for negative effects of power grid infrastructure investments on economic outcomes, which can, however, be mitigated by an adequate design of the investments and its framework conditions.

Keywords: DSGE analysis; infrastructure; Germany; electric grid; energy transition; flexibility (search for similar items in EconPapers)
JEL-codes: C68 E61 O13 P18 Q43 Q48 Q56 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2019-08-01, Revised 2020-04-01
New Economics Papers: this item is included in nep-dge, nep-ene, nep-mac and nep-ore
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