The unintended consequences of the EU ETS cancellation policy

With the Phase 4 cancellation provision, the cumulative emissions cap of the EU ETS has become dependent on the amount of surplus allowances and future emissions abatement costs. In this paper, we discuss how the design of the market stability reserve greatly increases uncertainty over cumulative emissions and implies that there will be more cancellation when future abatement is more costly, making the policy more stringent when the cost of compliance is higher. Moreover, we illustrate how overlapping policies may lead to paradoxical effects on cumulative emissions

Electricity transmission reliability: the impact of reliability criteria

In the presence of transmission outages, uncertain demand and variable renewable supply, network operators keep a reliability margin to avoid interruptions and black-outs. The reliability margin is presently determined by the N-1 reliability criterion. Our analytical model defines the optimal reliability margin by balancing congestion costs and interruption costs. This leads to new operational reliability margins and new transmission investment rules that are superior to the N-1 criterion. A numerical illustration shows under what conditions the new rules dominate the N-1 criterion.status: publishe

Optimal Electricity Transmission Reliability: Going beyond the N-1 Criterion

status: publishe

COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV

The EU emissions trading system's (ETS) invalidation rule implies that shocks and overlapping policies can change cumulative carbon emissions. This paper explains these mechanisms and simulates the effect of COVID-19, the European Green Deal, and the recovery stimulus package on cumulative EU ETS emissions and allowance prices. Our results indicate that the negative demand shock of the pandemic should have a limited effect on allowance prices and rather translates into lower cumulative carbon emissions. Aligning EU ETS with the 2030 reduction target of -55% might increase allowance prices to 45-94 euro/ton CO2 today and reduce cumulative carbon emissions to 14.2-18.3 GtCO(2) compared to 23.5-33.1 GtCO(2) under a -40% 2030 reduction target. Our results crucially depend on when the waterbed will be sealed again, which is an endogenous market outcome, driven by the EU ETS design, shocks and overlapping climate policies such as the recovery plan. This paper finds that the EU's 2030 reduction target of -55% might correspond to EU ETS allowance prices between 45 and 94 e/ton CO2 today, while the invalidation rule reduces carbon emissions to 14.2 to 18.3 GtCO2 over the EU ETS' remaining lifetime

Reliability standards and generation adequacy assessments for interconnected electricity systems

International audienceThis paper studies the consistency between two contradictory policies in the electricity industry. On the one hand, electricity systems are increasingly interconnected. On the other hand, reliability standards, whose value was typically set when countries were hardly interconnected, are still enforced at the national level. We show that enforcing autarky reliability standards may still reach the welfare optimum in the presence of interconnections, but only under two conditions. First, installed generation capacities should be determined jointly, while considering the whole power system. Second, reliability calculations should fully internalize external adequacy benefits occurring in neighboring systems. We run a numerical application for a set of European countries and find that existing interconnections may lead to generation adequacy benefits of around one billion euros per year, by enabling a 18.9 GW decrease in generation capacity. In our case study, regional coordination is found to be more important than fully internalizing external reliability benefits in adequacy simulations

The Heterogeneous Value of Solar and Wind Energy: Empirical Evidence from the United States and Europe

status: In preparatio

A First Analysis Of the Market Stability Reserve in the European Emission Trading System

No ISBN / ISSNstatus: accepte