Smart Grids And Networks Of The Future- Eurelectric Views

ABSTRACT This paper is a summary of information on the existing level of the Smart Grids environment and of the related challenges in terms of networks development. It focuses on regulatory recommendations for an optimal smart grids implementation

Gone with the Wind? Electricity Market Prices and Incentives to Invest in Thermal Power Plants under Increasing Wind Energy Supply

The increased wind energy supplied to many electricity markets around the world has to be balanced by reliable back up units or other complementary measures when wind conditions are low. At the same time wind energy impacts both, the utilization of thermal power plants and the market prices. While the market prices tend to decrease, the impact on the utilization of different plant types is at the outset unclear. To analyze the incentives to invest in thermal power plants under increased wind energy supply, we develop a computational model which includes start-up restrictions and costs and apply it to the German case. We find that due to current wind supply the market prices are reduced by more than five percent, and the incentives to invest in natural gas fired units are largely decreased. An increased wind supply erodes their attractiveness further. Consequently, a gap between the need for and the incentive to provide exibility can be expected

Banking of Surplus Emissions Allowances: Does the Volume Matter?

In the European Emission Trading scheme the supply of allowances exceeds emissions - cumulating, according to our estimates, in a surplus of 2.7 billion tonnes by 2013/2014. We find that initially the surplus was acquired by power companies so as to hedge future carbon costs. As the surplus exceeds this hedging demand, additional allowances need to be acquired as speculative investment. This requires higher rates of return and implies that expected future carbon prices are highly discounted. This could explain the recent drop in carbon prices. The analysis shows that the volume of unused allowances matters for the discount applied to future carbon prices. We use our supply-demand framework to assess currently discussed policy options set-aside, reserve price for auctions and adjustments of emission targets

Changing the Allocation Rules in the EU ETS: Impact on Competitiveness and Economic Efficiency

We assess five proposals for the future of the EU greenhouse gas Emission Trading Scheme (ETS): pure grandfathering allocation of emission allowances (GF), output-based allocation (OB), auctioning (AU), auctioning with border adjustments (AU-BA), and finally output-based allocation in sectors exposed to international competition combined with auctioning in electricity generation (OB-AU). We look at the impact on production, trade, CO2 leakage and welfare. We use a partial equilibrium model of the EU 27 featuring three sectors covered by the EU ETS - cement, steel and electricity - plus the aluminium sector, which is indirectly impacted through a rise in electricity price. The leakage ratio, i.e. the increase in emissions abroad over the decrease in EU emissions, ranges from around 8% under GF and AU to -2% under AU-BA and varies greatly among sectors. Concerning the overall economic cost, OB appears to be the least efficient policy, even when taking into account its ability to prevent CO2 leakage. On the other hand, this policy minimises production losses and wealth transfers among stakeholders, which is likely to soften oppositions. GF and AU are the most efficient policies from an EU perspective, even when leakage is accounted for. From a world welfare perspective and whatever the emission reduction, AU-BA is the least costly policy, while OB-AU, AU and GF entail similar costs