Hasberg, Kirsten Sophie

Hedegaard, Karsten

Meyer, Niels I

Morthorst, Poul Erik

Münster, Marie

Ropenus, Stephanie

English

he characteristics of renewable electricity production, namely close-to-zero marginal costs and fluctuating supply, results in an inherent problem: Lacking incentives for the provision of renewable electricity generation capacity. The electricity price is driven towards zero, when renewable production shares increase, as shown in the following diagram, driving down the revenue of electricity producers. This creates a dilemma: The incentive to invest in additional renewable installations decreases with increasing market penetration in liberalized markets. That is, the higher the share of renewables, the less profitable is the installation (of any generating capacity, not only renewable) – the ‘missing money’ problem. A paradox situation results: With the current market structure, renewables are dependent on support schemes, also in the long run. This is contrary to conventional wisdom, where learning curves and technological development result in increasing competitiveness over time.This presentation discusses tendering schemes as a regulatory mechanism to ensure the provision of (renewable) production capacity. Furthermore, it discusses the importance of demand response in creating a well-functioning electricity market. Especially the role of the “prosumer”, i.e. consumers with e.g. electric cars and heat pumps are considered. Furthermore, a redefinition of the role of the Transmission System Operator (TSO) and Distribution System Operators (DSO) is discussed

    Aalborg UniversitetAbstract: Structural changes of the electricity marketRegulatory approaches under increasing shares of renewablesHasberg, Kirsten Sophie ; Morthorst, Poul Erik; Ropenus, Stephanie; Hedegaard, Karsten;Münster, Marie; Meyer, Niels IPublished in:Det miljøøkonomiske råds konference 2010Creative Commons LicenseCC BY-SA 4.0Publication date:2010Document VersionPublisher's PDF, also known as Version of recordLink to publication from Aalborg UniversityCitation for published version (APA):Hasberg, K. S., Morthorst, P. E., Ropenus, S., Hedegaard, K., Münster, M., & Meyer, N. I. (2010). Abstract:Structural changes of the electricity market: Regulatory approaches under increasing shares of renewables. InDet miljøøkonomiske råds konference 2010 De Økonomiske Råd.General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright ownersand it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.            ? Users may download and print one copy of any publication from the public portal for the purpose of private study or research.            ? You may not further distribute the material or use it for any profit-making activity or commercial gain            ? You may freely distribute the URL identifying the publication in the public portal ?Take down policyIf you believe that this document breaches copyright please contact us at vbn@aub.aau.dk providing details, and we will remove access tothe work immediately and investigate your claim.Downloaded from vbn.aau.dk on: November 25, 2020Abstract Discussion paper: Structural changes of the electricity market - regulatory approaches under increasing shares of renewables   Authors: Kirsten Hasberg (1), Poul Erik Morthorst (2), Stephanie Ropenus (3), Karsten Hedegaard (4), Marie Münster (5), Niels I. Meyer (6)  (1) System Analysis Division, RISØ DTU National Laboratory for Sustainable Energy, khas@risoe.dtu.dk. Corresponding author. (2) Systems Analysis Division, RISØ DTU National Laboratory for Sustainable Energy pemo@risoe.dtu.dk (3) Systems Analysis Division, RISØ DTU National Laboratory for Sustainable Energy, srop@risoe.dtu.dk (4) Systems Analysis Division, RISØ DTU National Laboratory for Sustainable Energy, khed@risoe.dtu.dk (5) Systems Analysis Division, RISØ DTU National Laboratory for Sustainable Energy, maem@risoe.dtu.dk (6) Technical University of Denmark, DTU BYG National Laboratory for Sustainable Energy, nim@byg.dtu.dk   The characteristics of renewable electricity production, namely close-to-zero marginal costs and fluctuating supply, results in an inherent problem: Lacking incentives for the provision of renewable electricity generation capacity. The electricity price is driven towards zero, when renewable production shares increase, as shown in the following diagram, driving down the revenue of electricity producers.   Price formation in competitive markets. Source: Bode 2008  This creates a dilemma: The incentive to invest in additional renewable installations decreases with increasing market penetration in liberalized markets. That is, the higher the share of renewables, the less profitable is the installation (of any generating capacity, not only renewable) – the ‘missing money’ problem.  A paradox situation results: With the current market structure, renewables are dependent on support schemes, also in the long run. This is contrary to conventional wisdom, where learning curves and technological development result in increasing competitiveness over time.    This paper discusses tendering schemes as a regulatory mechanism to ensure the provision of (renewable) production capacity.  Furthermore, the paper discusses the importance of d mand response in creating a well-functioning electricity market. Especially the role of the “prosumer”, i.e. consumers with e.g. electric cars and heatpumps are considered.  Furthermore, a redefinition of the role of the Transmission System Operator (TSO) and Distribution System Operators (DSO) is discussed.    References: Bode, Sven. 2008. Renewable energy and power prices - incentives to invest under different support schemesArrhenius - Institut für Energie- und Klimapolitik.  Boot, P. A. and van Bree, B. (2010): A zero-caron European power system in 2050: proposals for a policy package. Energy research Centre of the Netherlands (ECN). Prepared for Roadmap 2050: A practical guide to a prosperous, low carbon Europe (www.roadmap2050.eu)   

Abstract: Structural changes of the electricity market:Regulatory approaches under increasing shares of renewables

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Abstract: Structural changes of the electricity market:Regulatory approaches under increasing shares of renewables

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