The Optimal Energy Mix in Power Generation and the Contribution from Natural Gas in Reducing Carbon Emissions to 2030 and Beyond

This paper analyses a set of new scenarios for energy markets in Europe to evaluate the consistency of economic incentives and climate objectives. It focuses in particular on the role of natural gas across a range of climate policy scenarios (including the Copenhagen Pledges and the EU Roadmap) to identify whether current trends and policies are leading to an economically efficient and, at the same time, climate friendly, energy mix. Economic costs and environmental objectives are balanced to identify the welfare-maximising development path, the related investment strategies in the energy sector, and the resulting optimal energy mix. Policy measures to support this balanced economic development are identified. A specific sensitivity analysis upon the role of the 2020 renewable targets and increased energy efficiency improvements is also carried out. We conclude that a suitable and sustained carbon price needs to be implemented to move energy markets in Europe closer to the optimal energy mix. We also highlight that an appropriate carbon pricing is sufficient to achieve both the emission target and the renewable target, without incurring in high economic costs if climate policy is not too ambitious and/or it is internationally coordinated. Finally, our results show that natural gas is the key transitional fuel within the cost-effective achievement of a range of climate policy targets

From Throughput to Access Fees

This chapter critically evaluates how utilities will need to adjust their tariff structures to compete with new forms of energy production. The structure of these tariffs will be a critical determinant of the success or failure of utilities in the future. The authors assess existing and emerging tariff designs to address the advent of grid-connected substitutes such as distributed generation. The economic efficiency and equity implications of changing tariff designs are assessed based on existing and emerging technologies. The chapter concludes that utilities must be cautious in rapidly redesigning their business models or rebalancing their tariffs, as they attempt to recover revenue previously obtained through rising volumetric consumption. Importantly, adjusting tariffs to recover revenues in the short term may hasten the adoption of energy storage technologies, further undermining the financial stability of utilities in the long term.No Full Tex