Optimal policy identification: Insights from the German electricity market

Johannes Karl Herrmann and Ivan Savin

No 87, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: The diffusion of renewable electricity generating technologies is widely considered as crucial for establishing a sustainable energy system in the future. However, the required transition is unlikely to be achieved by market forces alone. For this reason, many countries implement various policy instruments to support this process, also by re-distributing related costs among all electricity consumers. This paper presents a novel history-friendly agent-based study aiming to explore the efficiency of different mixes of policy instruments by means of a Differential Evolution algorithm. Special emphasis of the model is devoted to the possibility of small scale renewable electricity generation, but also to the storage of this electricity using small scale facilities being actively developed over the last decade. Both combined pose an important instrument for electricity consumers to achieve partial or full autarky from the electricity grid, particularly after accounting for decreasing costs and increasing efficiency of both due to continuous innovation. Among other things, we find that the historical policy mix of Germany introduced too strong and inflexible demand-side instruments (like feed-in tariff) too early, thereby creating strong path-dependency for future policy makers and reducing their ability to react to technological but also economic shocks without further increases of the budget.

Keywords: differential evolution; electricity storage; energy grid; feed-in tariff; renewable energy (search for similar items in EconPapers)
JEL-codes: C63 Q41 Q42 Q48 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ene and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal policy identification: Insights from the German electricity market (2017)
Working Paper: Optimal Policy Identification: Insights from the German Electricity Market (2016)
Working Paper: Optimal Policy Identification: Insights from the German Electricity Market (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:87

DOI: 10.5445/IR/1000055424

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