Coordination of carbon reduction and. renewable energy support policies. Pedro Linares a,b, *, Francisco Javier Santos a, Mariano Ventosa a

Size: px
Start display at page:

Download "Coordination of carbon reduction and. renewable energy support policies. Pedro Linares a,b, *, Francisco Javier Santos a, Mariano Ventosa a"

Transcription

1 CP361 RL Coordination of carbon reduction and renewable energy support policies Pedro Linares a,b, *, Francisco Javier Santos a, Mariano Ventosa a a) Instituto de Investigación Tecnológica. Univ. Pontificia Comillas. Sta. Cruz de Marcenado 26, Madrid, Spain. b) JFK School of Government, Harvard U., and FEDEA *Corresponding author: Tel Fax pedro.linares@iit.upcomillas.es 1

2 Abstract. The European Union is currently pursuing ambitious objectives regarding carbon emissions reductions and renewable energy (RES) deployment, as part of a comprehensive energy policy effort. However, significant interactions may arise between the policy instruments used (Emissions Trading Scheme and RES-specific support), such as double-counting incentives or geographical overlapping. This paper examines these interactions using analytical and simulation research and offers some policy recommendations. The major conclusions are that both instruments are required in order to meet the objectives, and that their combination may be advantageous regarding consumer cost. However, they must be carefully coordinated, since part of the carbon allowance price may be incorporated into the RES certificate price. This will produce a reduction in the strength of the emissions reduction signal, and also a different distribution of the cost of the policies. In addition, each policy needs focus at the geographical level appropriate for its objectives (carbon and security of supply policies at the regional level, and RESinduced local development at the national one). Keywords: carbon emissions trading, renewable energy, electricity markets, policy coordination, 1. Introduction The EU is the world leader in renewable electricity development, thanks to the effective support policies which have been set up in some member states. The European Commission has certainly given this development political support by 2

3 issuing the European Directive 2001/77/EC, which concerns the promotion of electricity produced from renewable energy sources, establishing indicative targets and some baseline regulation. In addition, the EU is also playing a leading role in the action against climate change, and is setting unilateral, ambitious targets for the reduction of CO 2 emissions. Indeed, the EU introduced in 2003 a CO 2 trading scheme, the European ETS, supported by the European Directive 2003/87/EC. This scheme. will indirectly encourage investments in clean technologies such as gas, nuclear energy and renewables, while penalizing investments in other dirtier technologies such as coal. This indirect incentive for renewables may interact significantly with current support schemes for renewable energies (especially with those based on premiums), by adding to the profits of renewable producers through a higher electricity price. Although it is debatable whether the support for renewables accounts for their carbon reduction benefits or for their local positive externalities (which most of the times is not so clear; see, e.g., Komor and Bazilian (2005) or Bergmann et al (2006)), it is possible that the implicit carbon tax may in fact be double-counting the carbon externality of renewables, because of the slow adjustment of support schemes. This brings out the problem of how to avoid this double-counting and of how to combine regional regulations such as the ETS Directive and national ones such as RE support schemes. The objective of this paper is to provide some insights, based on a theoretical and quantitative analysis of this interaction. This is a timely discussion, given the recent statement of new goals for carbon reductions 3

4 and RES deployment by the European Commission, and the expected review of the ETS and the Renewables Directive. Some analyses have already been carried out on the expected consequences of carbon trading mechanisms on renewable support schemes. For instance, Amundsen and Mortensen (2001), Boots (2001) or Jensen and Skytte (2003) have assessed the interaction between carbon trading and tradable green certificates using analytical models. Del Río et al. (2005) have looked at the impact of clean development mechanisms and joint implementation on the deployment of renewable electricity in Europe, although again from an analytical point of view. Hindsberger et al. (2003) and Unger and Ahlgren (2006) used a simulation model to obtain quantitative results for the Nordic electricity and energy sectors respectively also under a tradable green certificate system. Linares et al (2006 a, b) have used another simulation model to analyze the impact of carbon emissions trading for the Spanish electricity market and renewable investments. Compared to previous research, this paper presents a comprehensive overview of the problem, shows more detailed and realistic results from a simulation model in which both premiums and tradable green certificates are analyzed as renewable energy promotion mechanisms, and provides some recommendations on how to approach the required integration of carbon reduction and renewable support policies in order to achieve an efficient support for renewable energies under the new scenario. The existing results are revised in section 2, while section 3 presents some results from a simulation model for Spain. Finally, section 4 provides the conclusions and recommendations from the study. 4

5 2. A review of the interactions between RE promotion schemes and carbon emissions reduction policies The impacts of the interaction of carbon reduction and renewable promotion policies on the electricity market are not trivial, even in some cases producing counter-intuitive effects, as will be shown later. Both instruments may be used in order to achieve the same objective: the support to renewable energies contributes to a reduction in carbon emissions, by increasing the relative share of renewables in the energy production mix (although this effect may be reversed in dynamic terms under certain conditions 1 ); and a carbon trading system (with an implicit price for emissions) promotes to a certain extent a larger penetration of renewable energies, since it reduces the cost gap existing between conventional and renewable energy sources. Therefore, it would be desirable that, since many European countries use both instruments, this use would be as coordinated as possible, in order to achieve the objectives sought at the least cost for society and the environment, and also in order to send to the market the right signals. Figure 2.1 (similar to the one presented by Jensen and Skytte, 2003) represents the existing relationship between the instruments: Figure 2.1. Relationships between carbon emissions trading, renewable promotion and the electricity market 1 If renewables are promoted to the extent to which they substitute new investments in conventional technologies (new gas combined cycles, for example), then old and dirty power plants may continue in operation more time than desired, thus preventing large carbon emissions reductions in the conventional side of the energy mix. 5

6 As can be seen, renewable producers participate in the electricity market and also in the renewable market, considering as such the system by which an additional price for renewables is generated, be it by selling and buying green certificates or through premiums. Conventional producers go to the electricity market and also to the carbon emissions market, where they buy and sell the permits required for their emissions. Other economic sectors also participate in this market (in the European case, the rest of industrial sectors). Finally, consumers participate in the electricity market, where they buy their electricity, and in the renewable market, where they pay the extra cost for these technologies. Therefore, all instruments are connected through the different markets, and the final cost for consumers depends on the interaction of all of them. It should be noted this analysis only considers those impacts detectable by simulation models, and therefore no considerations of investment risk, technology learning or such are included. This allows for most of the conclusions to be valid both for price instruments (such as carbon taxes or renewable premiums) and for quantity instruments (carbon trading or green certificates). Therefore, from now on, we will consider both types of instruments as equivalent without loss of generality, although in practical terms they may not be so (see Weitzman (1974) or Menanteau et al (2003)). 2.1 Impact of carbon reduction policies Carbon emissions trading (or rather, the limitation of the emissions on which it is based) or carbon taxes produce an increase in the price of electricity, which in turn produces an increase in the cost for the consumer in all cases. This increase will depend on the regulatory framework: in marginal price markets the increase will 6

7 always be larger than for those based on cost of service remuneration. This is shown in Figure 2.2, where the supply curve is modified from (1) to (2) due to the introduction of a carbon tax (or a permit price). The light grey area (a rectangle which is partially overlapped by the dark grey area) is the cost increase in marginal price markets, while the dark grey area is the one corresponding to cost-of-service markets. The increase in marginal price markets is due to the existence of windfall profits, which on the other hand, in theory, are the right long-term signal for investment in less-polluting equipment (although they may be received by spent technologies, and therefore may have to be regulated). Figure 2.2. Impact of carbon reduction policies on electricity prices The increase in electricity price also means a decrease in the price of the green certificate (or premium) received by renewable energies, since the certificate or premium is (or at least should be) the difference between the long-run marginal cost of the renewable technology and the electricity price. If the electricity price increases, the certificate price is reduced. According to Amundsen and Mortensen (2001), the decrease in TGC prices is larger than the increase in electricity prices, so the installation of renewable energy would be disincentived. However, this has not been proved by simulation results, as will be shown later. Hindsberger et al (2003) and Unger and Ahlgren (2006) argue that TGC prices would not be changed significantly by carbon reduction policies, but this is because under their assumptions, emission permit prices (or the equivalent carbon tax) are very low due to large renewable quotas. Finally, an increase in the reduction of carbon emissions brings forward an increase in the price of the emission permit, with the corresponding increase of the price of 7

8 electricity and the reduction in the price of the green certificate. In the limit, a very high reduction of emissions might produce a permit price so high that it would allow renewable energies to enter the electricity market without any need for compensatory payments (and therefore without the need for a specific promotion mechanism). However, as will be seen later, this is not a common situation for large renewable energy quotas, since there are generally much cheaper options for reducing emissions than renewable energies (as shown by Unger and Ahlgren, 2006). 2.2 Impact of the policies for promotion of renewable energies Renewable energy promotion mechanisms have an ambiguous impact on the cost of electricity for the consumer. Basically, these instruments imply an extra cost for the consumer, since renewable energies are generally more expensive than conventional ones. But at the same time, by requiring less conventional energy, the price of electricity is reduced. This effect is due to two causes: first, with an upward slope of the electricity supply curve, the reduction of demand for conventional electricity may change the marginal unit in the system, and therefore the marginal cost. But even if the supply curve is horizontal (as may happen when several combined cycles are setting the marginal price), there may be a reduction in prices if there is a certain price elasticity of the fuel price (if gas demand, for example, is reduced, then gas prices might decrease and therefore the price of electricity, see e.g. Wiser and Bolinger or Fischer (2006)). The final impact on the consumer will depend on the amount of the extra cost (which in turn depends on the cost differential between conventional and renewable energies and on the shape of the 8

9 renewable energy supply curve), and on the amount of the decrease of the price of electricity (which depends on the shape of the electricity supply curve, on the price elasticity of conventional fuels, and on the remuneration system marginal price or cost of service ). Indeed, Jensen and Skytte (2003) later verified by the simulations of Hindsberger et al (2003) and Unger and Ahlgren (2006) conclude that, under certain assumptions, it is possible to identify the solutions which minimize consumer costs: when an increase in the renewable quota means a reduction in costs, then it is feasible to find combinations of both instruments which minimize costs. In most cases, this combination means using exclusively the renewables quota. In this way, we may find a counter-intuitive result, in that it may be cheaper to reduce emissions by promoting renewable energies (due to the cost reduction for the consumers), even knowing that renewable technologies are much more expensive for carbon reduction than others (e.g., gas combined cycles, energy saving measures). This apparent paradox is due to the existence of windfall profits associated with the carbon trading system, and therefore is more likely to happen in the short term, since in the long term windfall profits, if well adjusted, will give the right signal to the market in order to evolve towards a less-emitting electricity production mix. To this extent, the coexistence with a carbon emissions trading system may have some importance, since the emissions trading system changes the electricity supply curve, and this may change the cost-benefit relationship. Figure 2.2 shows a possible situation for the Spanish electricity market (for a description of the Spanish electricity market see Crampes and Fabra, 2005), in which gas combined cycles pass coal in the merit order when a carbon reduction 9

10 scheme is introduced. The amount of renewables promoted is Q R, A represents the reduction in the cost of the electricity due to the introduction of Q R and B represents the extra cost of renewables to the system. As may be seen, this increases the reduction of the costs of electricity (from A to A ), and decreases the extra cost of renewable promotion (from B to B ). Therefore, it seems that in similar situations the carbon trading system makes more favorable a larger introduction of renewables, from the point of view of the consumer cost. Figure 2.3. Impact on the costs and benefits of renewable promotion of a price for carbon emissions This impact will also depend on the amount of renewables promoted. The larger this is, the larger will be the cost of the marginal renewable energy, the larger will be the certificate price or the premium required, and therefore the larger the extra cost. An increase in the participation of renewable energies may also have impacts on the price of the carbon emissions permit, depending on the size of the permit market compared to the renewable market. The relevant relationship here is the volume of carbon reductions attainable by the RES market (which in turn depend on the current electricity generation mix) compared to the total reductions possible or requested by the carbon reduction policy. If the market is very large (as expected under the Kyoto Protocol) then the impact will be minimal, since the promotion of renewables in a country or region will not be enough as to influence the permit price. However, if the trading system has a limited extent, or if renewable promotion mechanisms are widespread, renewable energy promotion may have an influence (e.g., for Europe in 2020 the expected reduction in CO 2 emissions from renewables is around 350 Mt, whereas the total reduction required is around 520 Mt). This influence is due to the fact that, when more non-polluting energies enter 10

11 into the system, it is cheaper to achieve the same amount of emissions reduction, and therefore the price of the permit decreases. This has been shown by Hindsberger et al (2003) and Unger and Ahlgren (2006). This in turn may also produce a reduction in the price of electricity, and thus in the cost for the consumer. Figure 2.4 shows that when renewables are promoted through premiums or certificates, their marginal cost is reduced, and the carbon marginal reduction costs curve moves to the left (since now renewables have a lower reduction cost). This results in a decrease of the marginal cost required to reach the reduction quota, and the same happens with the permit price. Figure 2.4. Impact of the promotion of renewables on the price of the carbon emission permit This situation is somewhat peculiar, since renewable producers are compensating their larger costs compared to conventional energies by two ways: one part is recovered through the emission permit price, and the other through the green certificate price or premium. In the case where renewable energies were those setting the marginal reduction cost, the equilibrium in this market would not be determined, and then renewable producers might choose whether to recover their costs in the renewable market or in the emissions market. Hence, as shown in the diagram, the larger the renewable quota in a small emissions market, the larger the green certificate price, and the lower the emission permit. Consumer costs are reduced, as well as firm profits (since windfall profits are also reduced). Figure 2.5. Impact of the promotion of renewables on the emission permit price and on the green certificate price 11

12 To summarize: an increase in the renewable quota means an increase in the green certificate price, and in small emission markets, a decrease in the permit price (this may also be interpreted by assuming that a part of the permit price becomes part of the certificate price). An increase in the reduction of carbon emissions means an increase in the price of the emission permit and a decrease in the green certificate price. This is shown succinctly in Figure 2.6, from the point of view of how the renewable producer receives its income. Figure 2.7. Impact of the promotion of renewables and carbon reduction from the renewable producer s point of view Finally, the introduction of green certificates also produces additional impacts on the electricity market: by reducing the amount of non-renewable energy required, the demand becomes less elastic (the slope of the curve is the same, but the intercept changes). This increases the market power in the non-renewable electricity market, which would increase oligopoly prices compared to the perfectly competitive case. However, this is compensated by the reduced prices for allowances (as explained before), and also by the smaller size of the non-renewable market. 2.3 Combined effects of the promotion of renewables and the reduction of CO 2 We have seen that the instruments interact, producing effects which are not easily predicted in terms of consumer cost, electricity prices, green certificate prices, or emission permit prices. Figure 2.7, shows that it is not possible to predict either the sign or the quantity of the change in the price of electricity or consumer cost when 12

13 the two instruments are combined and the emissions market is small. (If the emissions market is large enough, then renewable promotion instruments do not influence it, and therefore there is only an influence of the emissions market on the renewables one). Figure 2.8. Combined effect of the promotion of renewables and carbon reduction Renewable energy producers and the share of renewables in the system may not be affected by the interaction, since they would receive the long run marginal cost through green certificates. If the support system is based on premiums, they may be even better off if the premium is slowly adjusted. However, the rest of the electricity sector will be affected by the change in the price of electricity, and the same happens with the consumer cost. Therefore, this is a necessary analysis. Thenext section presents the results from a simulation study carried out for the Spanish electricity system. The advantage of this study compared to the previous ones is that it uses a long-term (generation expansion) model which allows for representing the oligopolistic conditions usual for electricity markets (and therefore provides more realistic estimates of electricity prices, technologies, and carbon emissions), and that it accounts for all industrial sectors covered by the EU ETS. The ETS and RES-E markets are assumed to be competitive ones. More details about the model and data used may be found in Linares et al (2007). 13

14 3. Simulation results of the interaction between the European ETS and national RE support schemes 3.1 Scenarios analyzed In order to analyze the interaction between the carbon reduction and renewable support policies, a number of scenarios have been simulated in which these policies are considered independently or combined, plus a base case in which no such policies are considered. The common data underlying these scenarios are: - The simulation has been carried out for a 23-year period ( ). However, in order to avoid wrong investment decisions, only the first 16 years have been considered ( ) - The existing technologies considered are: nuclear, domestic coal, brown lignite, black lignite, imported coal, fuel, natural gas, gas combined cycles, regulated hydro, run-of-the-river hydro, pumping units, biomass, cogeneration, small hydro, wind and solar. Their installed power and cost parameters have been taken from CSEN (1997). - The new technologies that might be installed are: gas combined cycle, advanced nuclear, supercritical coal, three types of biomass, cogeneration, small hydro, three types of wind, and solar thermal. The parameters for these technologies have been obtained from the SETRIS database 14

15 (European Commission, 2004), except from the maximum power, which has been obtained from the Spanish Ministry of Industry (MINER, 2002). - Demand growth rate has been set at 2.5%, again following the Spanish Ministry of Industry (MINER, 2002). All cases have been simulated considering both a marginal-price and a cost-ofservice remuneration. In the following box we outline the cases simulated, with their corresponding key names as will be used in the result tables. In other already mentioned studies such as Hindsberger et al (2003) or Jensen and Skytte (2003) another scenario is considered, which analyses the cost of a certain emissions reduction scenario only with renewables promotion. However, this is not possible in our study, since it is almost impossible to know beforehand the amount of reduction from the electricity sector, since that is a variable amount contingent on the price of the permit, which is formed endogenously to the model. 15

16 Case A: This is the base case: an oligopolistic electricity market without renewable support nor carbon emissions reduction. Case B: The base case plus carbon emissions trading under the European Directive. Case C: The base case plus renewable promotion schemes. Case C1: Renewable promotion through green certificates, with a quota equal to the one resulting from the current situation in Spain (under premiums). Case C2: Renewable quota of 17.5% in Case D: Base case plus renewable promotion schemes plus carbon emissions trading. Case D1: Idem C2 plus carbon emissions trading. Case D2: Idem C3 plus carbon emissions trading. In the following section results are presented and analyzed. It has to be remarked that all monetary values shown correspond to 2004 euro, and that no inflation has been considered in order to better observe the impact of the instruments analyzed. 3.2 Results Table 3.1: Electricity market price ( /MWh) First, it may be seen that under the base case there is an increase in the price of electricity because of the increase in demand, which requires more expensive technologies (such as supercritical coal) to enter into the system. Prices increase 5% to 2012, and then stabilize from then on, since it is the same technology which sets the system marginal price. When carbon trading and TGCs are introduced, prices are reduced compared to the case with emissions trading but without renewables promotion, since part of the 16

17 emissions reduction is achieved with renewables, and therefore the emission permit price is lower, which in turn produces a lower price of electricity. This price reduction is larger the larger is the renewable quota, as seen in case D2. Table 3.2: Emission permit price ( /t) The permit price under the emissions trading system rises from 6 to 22. These prices are consistent with other results presented in the literature, and with the current emissions markets prices. It is interesting to note that the permit price is negligible the first three years, because the emissions reduction required is not significant. When renewable promotion systems are included, then the permit price decreases (and decreases more the larger the renewable quota), since renewables contribute to emissions reductions, and therefore reduce the marginal cost of this emissions reduction. As previously mentioned, what is really happening is that part of the permit price is being incorporated into the green certificate price. It should be noted that these prices correspond to a national emissions market, as has been modeled. However, the emissions market should have a European scope (or even global from 2008). But this European market has not been modeled because of the difficulties in knowing the marginal abatement costs and emissions reductions in other countries. In any case, it may be estimated that the enlargement of the emissions market should result in lower permit prices, by making available cheaper reduction options (including CDM or JI, which have not been considered here). 17

18 Table 3.3: Green certificate prices ( /MWh) The green certificate price, as previously explained, is the difference between the renewable energy marginal cost and the electricity market price, (e.g. the degree of support required by the marginal renewable energy producer to recover his longterm costs). In this table we may see two effects: the green certificate price rises as long as the renewable quota increases (the quota may be observed in following tables), for two reasons. The marginal production cost increases and the price of the electricity market decreases. This may be observed in cases C1 or D1 from 2012 (when the renewable quota increases). when an emissions trading system is implemented, the certificate price is reduced, because the electricity price increases. This may be observed by comparing cases C2 and D2. The certificate price is similar to the current premiums (29 /MWh for wind and biomass). The increase in the certificate price in cases C2 and D2 compared to C1 and D1 respectively indicates the extra cost due to the increase in the share of renewables. Table 3.4: CO 2 emissions in the electricity sector (Mt) In the base case we may see the expected evolution of emissions in absence of environmental policies: emissions would increase 26% in 2012 compared to 2005, and 53% in 2020 (86% and 225% respectively compared to 1990 emissions). This large increase is due mostly to the high growth of electricity demand. 18

19 When the limitation to carbon emissions is introduced, then emissions are largely reduced, staying around 30% over 1990 emissions (except in the first three years in which the required reduction is much smaller). When renewable promotion mechanisms are introduced, emissions also decrease, because of their higher participation in the system. But this reduction is not enough to achieve the expected reduction objectives. Therefore, in 2012 emissions would be 62% higher than in 1990 and 203% higher in These percentages are similar even if the renewables objectives are achieved. Therefore, we see that the current renewable promotion policies are not enough to achieve emissions reduction objectives by themselves. The combined effect of both mechanisms on emissions is not significant; the electricity sector keeps the same level of emissions as without renewable promotion systems (the higher penetration of renewables is compensated by less investment in combined cycles and higher use of domestic coals). Therefore, the combination of mechanisms does not have an influence on emissions, although, as seen in the rest of tables, it does have an influence in costs and renewable energy development. Table 3.5: New investments up to 2020 per technology (MW) Under the base case shown in Table 3.5, the expansion of the electricity sector is performed by investing in gas combined cycles, and to a much lesser extent, in supercritical coal. The introduction of a carbon trading scheme means that new coal investments disappear, and are substituted by more combined cycles and by agricultural residues and wind energy (these latter limited by their available 19

20 potential). It may also be observed that the amount installed increases very much (possibly due to the higher price of electricity). Renewable energy promotion systems by themselves achieve a certain investment in agricultural residues and wind energy (again, limited by the available supply). When a larger quota is required (C2 case) then also energy crops, forest residues, and all wind energy enters into the system. In the first case the investment in combined cycles is maintained, and there is also a small investment in supercritical coal, but when the renewable quota is increased the capacity installed of gas combined cycles is reduced, and coal disappears. The combination of instruments results in a larger installed power of renewable energies, with the worst wind energy being installed from the start. In a certain sense, the combined effect is very much the sum of the independent ones. Table 3.6: Production costs (M, net present value ) Production costs increase when the different instruments are introduced (it should be noted that the total energy demand is the same for all scenarios, so this increase can also be expressed in /MWh). A 13% increase because of emissions trading, an 8% due to renewable energy promotion (15% if the quota is 17.5%), and 18% when they are combined (21% if the renewable quota is 17.5%). The combination of instruments has a lower extra cost than the sum of separate instruments, so in terms of production costs, it is an interesting option. The renewables promotion systems (which are cheaper than the emissions trading system) are not able to achieve the required emissions reduction by themselves. 20

21 Table 3.7: Consumer costs (M, net present value ) Table 3.7 shows the different consumer costs of the different combinations of instruments, assuming a marginal price retribution system (again, we must remind that the total energy demand is the same, and therefore this analysis can also be translated to specific costs). If the system were a cost-of-service one, then the costs for the consumer would be similar to the production costs already mentioned. The marginal price system always implies larger costs for the consumer. On the other hand, it incorporates a long-term economic signal which, if well adjusted (that is, if there are no redundant windfall profits) is required for adapting the production system. The cheapest case is the base one, but this also means a high level of emissions and a low level of penetration of renewable energies. The introduction of a carbon trading system increases costs 12%. Renewable promotion systems also increase costs (10% to achieve a 17.5% quota). However, as already seen, these support systems are not able to reduce emissions to the required level, so they cannot be considered a cheaper option to reduce emissions, as was considered in the theoretical analysis. The combination of instruments features higher costs, although it shows some synergies: the simultaneous achievement of the emissions reductions and high penetration of renewable energies only increases costs by 15%, i.e, only 3% more than under the emissions trading system only. Therefore, it presents an interesting option, since it achieves both objectives at a lower cost than the sum of the two extra costs by themselves. 21

22 4. Conclusions and recommendations 4.1 Conclusions This paper has analyzed the interaction of renewable energy promotion policies with other environmental policies such as carbon trading systems, in order to assess their impacts on electricity markets and to identify the requirements for a coordinated use of these instruments. The analysis was undertaken at a national level, due to the difficulties in modeling in detail the European electricity market and its environmental policies. The conclusions can be easily generalized to the regional scope. When a carbon emissions trading system is added to a renewable promotion scheme, then electricity market prices are reduced (whereas the carbon emissions trading by itself would cause a significant increase). However, this does not imply a reduction in consumer costs, due to the extra cost of renewable energy promotion. Therefore, a reduction in the strength of the emissions reduction signal is sent to the market, but a higher cost occurs for the consumer (although we do achieve an increase in the penetration of renewable energies, which has added benefits). Those most affected by these policies are consumers, since their costs increase significantly, up to a 15% in some cases. Under a marginal price system, the extra cost of increasing the renewable quota is quite low, unlike under a cost-of-service system. In this case it may be observed to a certain extent the theoretical effect of cost reduction for consumers by an increase in the renewable quota. 22

23 The reduction of carbon emissions only through renewables promotion is very complicated under the current growth of demand, even in a high-renewablepotential country as Spain. But carbon trading systems are not able to stimulate renewables growth to the level desired. Therefore, it seems practical to keep both instruments in order to reach the objectives stated. This combination of instruments provides some synergies in the cost of achieving objectives: results show that the combination has a lower extra cost than the sum of the two instruments. This synergy seems larger under a marginal price system. As a final comment, this exercise has been carried out under a partial equilibrium approach for the electricity sector (except for the exchange of emission permits), and therefore, real effects may be somewhat different from those shown here. There may be substitution effects between energy sources when their relative prices are modified. In order to simulate these effects, a general equilibrium approach would be required. 4.2 Policy recommendations Some policy recommendations are made to identify the best ways to combine renewable promotions schemes and carbon reduction policies. This is a relevant issue, given the current policy process in the EU by which ambitious goals are being set for carbon emissions reductions, RES deployment, and energy efficiency (the 20/20/20 strategy). The way these policies will be finally implemented will have a large influence on consumer costs and on the performance of the system. 23

24 The relevant question here is: are these instruments compatible? And if they are, how should they be combined in order to achieve objectives at the lowest cost? The answer to the first question lies in the objectives of the two instruments. Are they complementary or alternative? If we only looked at the emissions avoided by renewable energy, then both instruments might be considered valid alternatives to reach the same goal. But renewable energies have more benefits than just emissions reduction: contribution to security of supply, industrial and rural development, etc. Therefore, it seems evident that they have to be promoted by themselves, besides controlling carbon emissions. Their objectives are complementary. One possibility, raised by Jensen and Skytte (2003) is to use only one instrument to achieve both objectives. We might use, as already mentioned, a single carbon emissions reduction instrument to indirectly promote renewables. But current carbon trading systems do not deliver the required level of renewables promotion, since the reduction of the cost differential between conventional and renewable energies is not enough. More ambitious reduction objectives (such as the 20% reduction set by the European Commission) would increase carbon prices, and therefore reduce this cost differential. But this would probably be too small for the also large RES deployment sought. It seems more feasible to use renewable energy promotion to reduce carbon emissions, since, it may be a cheaper policy than keeping both instruments. But this has two major drawbacks: - its higher efficiency is not guaranteed, since it depends on the rest of technologies. Our study has shown that the required carbon emissions 24

25 reduction cannot be achieved just by promoting renewables, and that costs are not lower - by not using carbon reduction policies, all possible emissions reductions not related to RES deployment (and which might be cheaper than RES) would lose their incentive Therefore, it seems that both instruments must co-exist. This co-existence may be peaceful whenever the emissions market is large enough compared to the renewables market, so that an increase in renewables does not have influence on the emissions permit price. This might be the current situation in Europe, with a European emissions market (or global from 2008) and national renewables support systems. This way, renewable producers receive the benefits from carbon emissions reduction through a higher electricity price, and the premiums or green certificates would only convey the additional local benefits of renewables. In the case of green certificates, the adjustment to changes in the emissions permit market is automatic, although this is not the case of premiums, for which appropriate revision mechanisms should be implemented. There are other reasons which may explain more aggregated efforts for the promotion of renewables: their benefits for security of supply, for example, might justify a common European RES market, as the one currently proposed. In this case, carbon and RES markets would have a similar size, and then green certificate prices may incorporate some part of the emissions permit price. This makes the permit price to be lower, and also the consumer cost. This seems beneficial for the 25

26 system (for the same electricity price and emissions, the total cost of the system is lower). However, some problems exist: - it may be impossible to know the shadow price of carbon, since now part of it is integrated into the green certificate. Since green certificates are addressing two different policy goals, the share between them will depend also on other policies, so it is not clear whether the resulting carbon price is the optimal one. - Based on the same reasoning, there may not be an efficient signal to the market for the reduction of carbon emissions - This also happens with the cost of the two different objectives pursued by RES deployment: security of supply (dealt at the EU level) and local development benefits (usually addressed by national governments) Therefore, a joint approach to carbon emissions reduction and RES deployment such as the one currently being proposed by the European Commission, while presenting several advantages in terms of the cost for the consumers, also requires the consideration of two important aspects, because of the possible crosssubsidies between policies: as we have seen, RES deployment policies may pay partly for the reduction in CO 2 emissions. - since these policies may be financed from different sources (RES deployment by electricity consumers, and carbon policies by general consumers), then different policy configurations would also imply a different distribution of the cost 26

27 - the objectives should be clearly defined, especially at the appropriate geographical level. Whereas carbon reductions or security of supply issues should be addressed (and therefore possibly financed equally) at the EU level, local development benefits due to RES deployment basically accrue to Member States, which should pay for them accordingly. This is especially relevant for the definition of common RES markets, and for their co-existence with national support schemes. These aspects depend on the general economic and fiscal context of the market. These recommendations may be valid within a first-best setting, the reality of the markets and the current fiscal policies may require second-best regulations, which therefore may require a joint assessment with other policies (e.g., using a general equilibrium approach including other fiscal policies). Acknowledgements This work has been supported in part by Fundacion BBVA and by the European Commission (Contract /C/02 004/2002). Pedro Linares also acknowledges the hospitality of Harvard Electricity Policy Group, and support from Fundacion Repsol YPF, Unión Fenosa, and the Spanish Ministry of Education (SEJ /ECON). References 27

28 Amundsen, E.S., J.B. Mortensen (2001). In The Danish Green Certificate System: some simple analytical results. Energy Economics, 23, Bergmann, A., N. Hanley, R. Wright (2006). In Valuing the attributes of renewable energy investments. Energy Policy, 34: Boots, M. (2001). In Green certificates and carbon trading in the Netherlands. Energy Policy, 31, Crampes, C. and N. Fabra (2005). In The Spanish Electricity Industry: Plus ça change. The Energy Journal, Special Edition European Electricity Liberalisation, CSEN (1997). Una simulación del funcionamiento del Pool de Energía Eléctrica en España. Dirección de Regulación. Comisión del Sistema Eléctrico Nacional. Del Río, P., F. Hernández, M. Gual (2005). In The implications of the Kyoto project mechanisms for the deployment of renewable electricity in Europe. Energy Policy, 33, European Commission (2004). Sustainable Energy Technology Reference Information System (SETRIS). Joint Research Centre, European Commission, Fischer, C. (2006). How can Renewable Portfolio Standards lower electricity prices?. RFF Discussion Paper Hindsberger, M., M.H. Nybroe, H.F. Ravn, R. Schmidt (2003). In Co-existence of electricity, TEP and TGC markets in the Baltic Sea Region. Energy Policy, 31,

29 Jensen, S.G. and K. Skytte (2003). In Simultaneous attainment of energy goals by means of green certificates and emissions permits. Energy Policy, 31, Komor, P. and M. Bazilian (2005). In Renewable energy policy goals, programs, and technologies. Energy Policy, 33, Linares, P., F. J. Santos, M. Ventosa, L. Lapiedra (2006a). In Estimated impacts of the European Emissions Trading Scheme Directive and permit assignment methods on the Spanish electricity sector. The Energy Journal, 27: Linares, P., F.J. Santos, M. Ventosa (2006b). An assessment of the consequences of the European Emissions Trading Scheme for the promotion of renewable electricity in Spain. In De Miguel, C., X. Labandeira y B. Manzano (eds). Economic Modelling of Climate Change and Energy Policies. Edward Elgar. Linares, P., F.J. Santos, M. Ventosa, L. Lapiedra (2007). In Incorporating oligopoly, CO 2 emissions trading and green certificates into a power generation expansión model. Automatica, forthcoming. Menanteau, P., D. Finon, M-L. Lamy (2003). In Prices versus quantities: choosing policies for promoting the development of renewable energy. Energy Policy, 31, MINER (2002). Planificación de los sectores de electricidad y gas. Ministerio de Economía y Hacienda. Unger, T., E.O. Ahlgren (2006). In Impacts of a common green certificate market on electricity and CO 2 -emission markets in the Nordic countries. Energy Policy, 33:

30 Weitzman, M.L. (1974). In Prices vs. quantities. Review of Economic Studies, 41, Wiser, Ryan, and Mark Bolinger. (Forthcoming). Can Deployment of Renewable Energy Put Downward Pressure on Natural Gas Prices? Energy Policy. 30

31 LINARES. TABLE 3.1 Table 3.1: Electricity market price ( /MWh) A B C1 C2 C3 D1 D2 D

32 LINARES. TABLE 3.2 Table 3.2: Emission permit price ( /t) A B C1 C2 C3 D1 D2 D

33 LINARES. TABLE 3.3 Table 3.3: Green certificate prices ( /MWh) A B C1 C2 C3 D1 D2 D

34 LINARES. TABLE 3.4 Table 3.4: CO 2 emissions in the electricity sector (Mt) A B C1 C2 C3 D1 D2 D

35 LINARES. TABLE 3.5 Table 3.5: New investments up to 2020 per technology (MW) A B C1 C2 C3 D1 D2 D3 Gas combined cycles Supercritical coal Energy crops Agricultural residues Forest residues Wind-good Wind-average Wind-poor TOTAL

36 LINARES. TABLE 3.6 Table 3.6: Production costs (M, net present value ) A B C1 C2 C3 D1 D2 D3 TOTAL

37 LINARES. TABLE 3.7 Table 3.7: Consumer costs (M, net present value ) A B C1 C2 C3 D1 D2 D3 TOTAL

38 FIGURES Renewable producers Renewable market Traditional producers Electricity market Consumers Other sectors Emissions market Figure 2.1. Relationships between carbon emissions trading, renewable promotion and the electricity market cost/price Demand p e Supply curve (2) Carbon tax p e Supply curve (1) energy Figure 2.2. Impact of carbon reduction policies on electricity prices 38

39 cost combined cycles Q R A A supply curve with CO 2 B B supply curve w/o CO 2 coal Q trad Q T energy Figure 2.3. Impact on the costs and benefits of renewable promotion of a price for Reduction quota Renewables Pp Pp RMC RMC Figure 2.4. Impact of the promotion of renewables on the price of the carbon emission permit 39

40 Ppermit Pcertificate Renewable quota Figure 2.5. Impact of the promotion of renewables on the emission permit price and on the green certificate price p re p re p re pco2 p CO2 Δ Red. CO 2 pco2 Δ RE. pco2 p e p e p e Figure 2.6. Impact of the promotion of renewables and carbon reduction from the renewable producer s point of view 40

41 Δ Renewable quota Δ? Green certificate price? Consumer cost ΔCO 2 reduction Δ? Emission permit price? Electricity price Figure 2.7. Combined effect of the promotion of renewables and carbon reduction 41

The joint impact of carbon emissions trading. and tradable green certificates on the. evolution of liberalized electricity markets: The Spanish case

The joint impact of carbon emissions trading. and tradable green certificates on the. evolution of liberalized electricity markets: The Spanish case 1 The joint impact of carbon emissions trading and tradable green certificates on the evolution of liberalized electricity markets: The Spanish case Pedro Linares, Francisco J. Santos * May 5 th 2007 Abstract

More information

Renewable energies and electricity prices in Spain

Renewable energies and electricity prices in Spain Renewable energies and electricity prices in Spain Liliana Gelabert*, Xavier Labandeira** and Pedro Linares*** Instituto de Empresa*, Universidade de Vigo**, Universidad Pontificia Comillas*** and Fundación

More information

Methodology for calculating subsidies to renewables

Methodology for calculating subsidies to renewables 1 Introduction Each of the World Energy Outlook scenarios envisages growth in the use of renewable energy sources over the Outlook period. World Energy Outlook 2012 includes estimates of the subsidies

More information

Development of Renewable Energies at Iberdrola

Development of Renewable Energies at Iberdrola Development of Renewable Energies at Iberdrola Pedro Barriuso Otaola Director, Renewable Energies Business Brussels, October 18th, 2005 IBERDROLA RENEWABLE ENERGIES Index 1. Iberdrola in the renewables

More information

Regulation and Policies on Electricity Markets

Regulation and Policies on Electricity Markets Regulation and Policies on Electricity Markets Lena Kitzing, Energy Economics and Regulation Lecture 3 in "31761 - Renewables in Electricity Markets" 12 February 2018 1/24/2018 AGENDA - The red thread

More information

The economics of new nuclear power plants in liberalized electricity markets *

The economics of new nuclear power plants in liberalized electricity markets * The economics of new nuclear power plants in liberalized electricity markets * Pedro Linares, Adela Conchado U. Pontificia Comillas August 17, 2009 Abstract The nuclear debate is strong in many countries,

More information

Long-term Market Analysis Nordics and Europe Executive summary

Long-term Market Analysis Nordics and Europe Executive summary Long-term Market Analysis Nordics and Europe 2018 2040 Executive summary 1 December 2018 Europe is set to develop a low carbon power system with significant contribution from renewable energy sources.

More information

Options for a 2020 EU Burden Sharing Agreement

Options for a 2020 EU Burden Sharing Agreement Options for a 2020 EU Burden Sharing Agreement Working Paper for the Federal Ministry for the Environment, Nature Conservation and Reactor Safety Berlin, November 2007 Dr. Felix Chr. Matthes Jakob Graichen

More information

AD Amsterdam, The Netherlands Published online: 15 Jun 2005.

AD Amsterdam, The Netherlands Published online: 15 Jun 2005. This article was downloaded by: [ECN Energie Onderzoek Centrum Nederland], [Jos Sijm] On: 27 July 2014, At: 23:54 Publisher: Taylor & Francis Informa Ltd Registered in England and Wales Registered Number:

More information

Interactions of the EU ETS with Green and White Certificate Schemes: Summary Report for Policy Makers

Interactions of the EU ETS with Green and White Certificate Schemes: Summary Report for Policy Makers 17 November 2005 Interactions of the EU ETS with Green and White Certificate Schemes: Summary Report for Policy Makers European Commission Directorate-General Environment Project Team Dr David Harrison,

More information

Sustainable energy policy choice: an economic assessment of Japanese renewable energy public support programs

Sustainable energy policy choice: an economic assessment of Japanese renewable energy public support programs Energy and Sustainability II 237 Sustainable energy policy choice: an economic assessment of Japanese renewable energy public support programs A. Suwa 1, K. Noda 1, T. Oka 2 & K. Watanabe 3 1 Environmental

More information

Renewable energy in Europe. E-turn 21 workshop Cologne, 10 May 2006

Renewable energy in Europe. E-turn 21 workshop Cologne, 10 May 2006 Renewable energy in Europe E-turn 21 workshop Cologne, 10 May 2006 Content 1. Introduction to Essent 2. EU policy 3. Support for renewable energy 4. Success factors 5. Outlook and recommendations Content

More information

Booming Prices on the European Emission Trading System

Booming Prices on the European Emission Trading System Éditoriaux de l Ifri Édito Énergie 8 October 2018 Booming Prices on the European Emission Trading System From Market Oversupply to Carbon Bubble? Charlotte ROIG-RAMOS Since its creation in 2005, the European

More information

Renewable Energy and Electricity Prices

Renewable Energy and Electricity Prices Renewable Energy and Electricity Prices Indirect Empirical Evidence from Hydro Reservoir Ronald Huisman Erasmus School of Economics - rhuisman@ese.eur.nl Conference Energy Finance 2013 - Essen - October

More information

The Commission's Energy Roadmap 2050

The Commission's Energy Roadmap 2050 MEMO/11/914 Brussels, 15 December 2011 The Commission's Energy Roadmap 2050 Why is there a need for the Roadmap 2050? The EU has set itself the goal to reduce greenhouse gas emissions to 80%-95% below

More information

Is there potential for government participation in flexibility mechanisms? - Evaluating the Finnish case

Is there potential for government participation in flexibility mechanisms? - Evaluating the Finnish case Is there potential for government participation in flexibility mechanisms? - Evaluating the Finnish case Juha Honkatukia Abstract The European directives on emission trade and flexible mechanisms are making

More information

Outcomes TYNDP Visions - Request for Stakeholder Input Period 3 December January 2013

Outcomes TYNDP Visions - Request for Stakeholder Input Period 3 December January 2013 Outcomes TYNDP 2014-2030 Visions - Request for Stakeholder Input Period 3 December 2012-7 January 2013 April 2013 1 INTRODUCTION In the process of constructing the 2014 Ten Year Network Development Plan,

More information

Supporting and integrating RE-Electricity in Italy The GSE experience IEA DSM Task XVII Seoul, Korea, September 2008

Supporting and integrating RE-Electricity in Italy The GSE experience IEA DSM Task XVII Seoul, Korea, September 2008 Supporting and integrating RE-Electricity in Italy The GSE experience IEA DSM Task XVII Seoul, Korea, September 2008 Giancarlo Scorsoni 18/05/2006 1 Huge challenges To cope with: Global Climate Change

More information

Renewable Energy: Wind Energy

Renewable Energy: Wind Energy Environmental Policy Renewable Energy: Wind Energy Prof. C. San Juan Annika Karstadt, Martin Galonska Wind energy - Agenda 1 2 3 4 5 What is renewable energy Wind energy Wind farms EU policy (White Paper

More information

Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation

Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation WP EN29-7 Interactions between measures for the support of electricity from renewable energy sources and CO2 mitigation De Jonghe, Cedric; Delarue, Erik; Belmans, Ronnie; D'haeseleer, William TME WORKING

More information

Energy policy support instruments for renewable energy sources: key principles & lessons learnt

Energy policy support instruments for renewable energy sources: key principles & lessons learnt Energy policy support instruments for renewable energy sources: key principles & lessons learnt Author: Gustav Resch Energy Economics Group (EEG) Technische Universität Wien (TU Wien) Contact: Web: http://eeg.tuwien.ac.at

More information

electricity. 2 NERA (2005) focuses on the interaction between those instruments, but in a separate manner (i.e., for ETS and

electricity. 2 NERA (2005) focuses on the interaction between those instruments, but in a separate manner (i.e., for ETS and Analysing the interactions of renewable energy promotion and energy efficiency support schemes: the impact of different instruments and design elements. Pablo del Río. Institute for Public Policies and

More information

The economics of new nuclear power plants in liberalized electricity

The economics of new nuclear power plants in liberalized electricity ESCUELA TÉCNICA SUPERIOR DE INGENIERÍA ICAI The economics of new nuclear power plants in liberalized electricity Pedro Linares, Adela 10th IAEE European Conference Vienna, Our motivation One of the key

More information

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo SEF of HKU November 13, 2013 Luo, Y. (SEF of HKU) ECON2220: Macro Theory November 13, 2013 1 / 36 Chapter Outline

More information

Renewable Energy Sources in EU - Current status, future developments and challenges

Renewable Energy Sources in EU - Current status, future developments and challenges Renewable Energy Sources in EU - Current status, future developments and challenges Kostantinos D. Patlitzianas, Argyris G. Kagiannas, John Psarras Decision Support Systems Lab (EPU-NTUA) National Technical

More information

What role subsidies? A CGE analysis of announcement effects of future policies on the development of emissions and energy consumption in Finland

What role subsidies? A CGE analysis of announcement effects of future policies on the development of emissions and energy consumption in Finland What role subsidies? A CGE analysis of announcement effects of future policies on the development of emissions and energy consumption in Finland Juha Honkatukia 1 Introduction The European Union has committed

More information

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo Econ HKU November 13, 2017 Luo, Y. (Econ HKU) ECON2220B: Intermediate Macro November 13, 2017 1 / 36 Chapter Outline

More information

SPANISH REGULATED SCENARIOS FOR RENEWABLE ENERGY AND CSP PLANTS

SPANISH REGULATED SCENARIOS FOR RENEWABLE ENERGY AND CSP PLANTS SPANISH REGULATED SCENARIOS FOR RENEWABLE ENERGY AND CSP PLANTS D. Bullejos, J. Llamas and M. Ruiz De Adana E.P.S.C. University of Cordoba. Ctra. Madrid-Cádiz Km., Córdoba, Spain E-Mail: bullejos@uco.es

More information

Econ Microeconomics Notes

Econ Microeconomics Notes Econ 120 - Microeconomics Notes Daniel Bramucci December 1, 2016 1 Section 1 - Thinking like an economist 1.1 Definitions Cost-Benefit Principle An action should be taken only when its benefit exceeds

More information

Effective and efficient long-term oriented RE support policies

Effective and efficient long-term oriented RE support policies Effective and efficient long-term oriented RE support policies Dr. Mario Ragwitz Fraunhofer Institute Systems and Innovation Research Saudi Solar Energy Forum Workshop on Renewable Energy Financing Mechanisms

More information

NATURAL GAS DEMAND IN MEXICO S ELECTRIC GENERATION SECTOR: RESTRUCTURING OF THE POWER INDUSTRY AND FORECASTS TO 2025

NATURAL GAS DEMAND IN MEXICO S ELECTRIC GENERATION SECTOR: RESTRUCTURING OF THE POWER INDUSTRY AND FORECASTS TO 2025 NATURAL GAS DEMAND IN MEXICO S ELECTRIC GENERATION SECTOR: RESTRUCTURING OF THE POWER INDUSTRY AND FORECASTS TO 2025 Alberto Elizalde, Instituto Mexicano del Petróleo Mariano Bauer, Instituto Mexicano

More information

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo SEF of HKU March 31, 2015 Luo, Y. (SEF of HKU) ECON2102CD/2220CD: Intermediate Macro March 31, 2015 1 / 36 Chapter

More information

Labelling provision in Directive 2003/54/EC

Labelling provision in Directive 2003/54/EC NOTE OF DG ENERGY & TRANSPORT ON DIRECTIVES 2003/54 AND 2003/55 ON THE INTERNAL MARKET IN ELECTRICITY AND NATURAL GAS THIS DOCUMENT IS NOT BINDING ON THE COMMISSION Labelling provision in Directive 2003/54/EC

More information

Power Market Design with Conventional and Renewable Energy Coexistence.

Power Market Design with Conventional and Renewable Energy Coexistence. Power Market Design with Conventional and Renewable Energy Coexistence. Ruben Chaer Associate Professor at the Instituto de Ingeniería Eléctrica (IIE-FING-UdeLaR) of Uruguay Manager T&DNC at the Administración

More information

Nordic Carbon Dioxide Abatement Costs

Nordic Carbon Dioxide Abatement Costs DET ØKONOMISKE RÅD S E K R E T A R I A T E T Nordic Carbon Dioxide Abatement Costs Jens Hauch Working Paper 1999:6 The Secretariat publishes a series of Working Papers, which primarily contains detailed

More information

REVIEW OF POWER SYSTEM EXPANSION PLANNING IN VIETNAM

REVIEW OF POWER SYSTEM EXPANSION PLANNING IN VIETNAM Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized REVIEW OF POWER SYSTEM EXPANSION PLANNING IN VIETNAM Tasks 1 and 2 Report Prepared for

More information

Dynamic reserve requirement in real time operation

Dynamic reserve requirement in real time operation Dynamic reserve requirement in real time operation Daniel Huertas Hernando SINTEF Energy Research SINTEF Energy Research 1 Wind power forecast uncertainty Uncertainty is higher for 1 wind farm than for

More information

Energy Security and Global Climate Change Mitigation

Energy Security and Global Climate Change Mitigation Energy Security and Global Climate Change Mitigation OP 55 October 2003 Hillard G. Huntington and Stephen P.A. Brown Forthcoming in Hillard G. Huntington Energy Modeling Forum 448 Terman Center Stanford

More information

The intelligent cooperation between consumption and generation at the heart of the Smart Grid.

The intelligent cooperation between consumption and generation at the heart of the Smart Grid. Smart Energy Demand Coalition Position Paper The intelligent cooperation between consumption and generation at the heart of the Smart Grid. The SEDC Vision: To promote the active participation by the demand

More information

MARK SCHEME for the May/June 2010 question paper for the guidance of teachers 9772 ECONOMICS. 9772/02 Paper 2 (Essays), maximum raw mark 75

MARK SCHEME for the May/June 2010 question paper for the guidance of teachers 9772 ECONOMICS. 9772/02 Paper 2 (Essays), maximum raw mark 75 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS Pre-U Certificate www.xtremepapers.com MARK SCHEME for the May/June 2010 question paper for the guidance of teachers 9772 ECONOMICS 9772/02 Paper 2 (Essays),

More information

EDF EU Group entities are regulated under EU ETS and EDF operates on the carbon market (EUAs and CERs/ERUs) through EDF-T, its trading entity

EDF EU Group entities are regulated under EU ETS and EDF operates on the carbon market (EUAs and CERs/ERUs) through EDF-T, its trading entity CARBON MARKETS SEMINAR PROSPECTS OF CARBON MARKETS AFTER THE PARIS AGREEMENT PART II - INSTITUTIONAL ARRANGEMENTS FOR EFFECTIVE CARBON PRICING VIEWS FROM THE PRIVATE SECTOR : EDF GROUP Dr. Jean-Yves CANEILL

More information

Support systems for renewables in the EU. Wind in Spain, a successful story

Support systems for renewables in the EU. Wind in Spain, a successful story Support systems for renewables in the EU. Wind in Spain, a successful story Gonzalo Sáenz de Miera Head of the Prospective Department Towards a convergence of renewable energy policy in the EU countries

More information

EXECUTIVE SUMMARY. What is carbon leakage?

EXECUTIVE SUMMARY. What is carbon leakage? EXECUTIVE SUMMARY When climate change mitigation policy introduces a cost for some but not others within the same sector, competition among companies is distorted. The implementation of the Kyoto Protocol

More information

Slovenia Energy efficiency report

Slovenia Energy efficiency report Slovenia Energy efficiency report Objectives: 4.3 TWh of end-use energy savings by 2016 Overview - (% / year) Primary intensity (EU=100) 1 115 - -1.9% + CO 2 intensity (EU=100) 120 - -1.6% - CO 2 emissions

More information

Aggregated Costs of the German Energiewende How to improve Cost Effectiveness

Aggregated Costs of the German Energiewende How to improve Cost Effectiveness 1 Aggregated Costs of the German Energiewende How to improve Cost Effectiveness Prof. Dr. Georg Erdmann TU Berlin; Chair Energy Systems Founder of Prognoseforum GmbH Member of the Federal Commission Energie

More information

FUNDACIÓN RAMÓN ARECES

FUNDACIÓN RAMÓN ARECES FUNDACIÓN RAMÓN ARECES Reunión Científica Retos económicos de la energía Scientific Meeting Economia Challenges for Energy Madrid, 7 y 8 de febrero de 2011 Madrid February 7-8, 2011 RESÚMENES / ABSTRACTS

More information

INTERACTIONS BETWEEN CO2 AND RENEWABLE ENERGY TARGETS IN EUROPE AN ASSESSMENT WITH POLES MODEL

INTERACTIONS BETWEEN CO2 AND RENEWABLE ENERGY TARGETS IN EUROPE AN ASSESSMENT WITH POLES MODEL INTERACTIONS BETWEEN CO2 AND RENEWABLE ENERGY TARGETS IN EUROPE AN ASSESSMENT WITH POLES MODEL 2014/11/13 Florent LE STRAT Elaine PELOURDEAU Yasmine ARSALANE Kimon KERAMIDAS Benoît PELUCHON AGENDA 1. FRAMEWORK

More information

7 Summary and Conclusion: Implications for Renewable Energy Instruments and Markets

7 Summary and Conclusion: Implications for Renewable Energy Instruments and Markets 7 Summary and Conclusion: Implications for Renewable Energy Instruments and Markets This research study presents the first systematic comparison of renewable energy instruments and markets in Germany,

More information

Memo on the Renewable Energy and Climate Change Package

Memo on the Renewable Energy and Climate Change Package MEMO/08/33 Brussels, 23 January 2008 Memo on the Renewable Energy and Climate Change Package 1. INTRODUCTION In recent decades, our lifestyle and growing wealth has had a profound effect on the energy

More information

Short characterisation of the Green-X model

Short characterisation of the Green-X model Short characterisation of the Authors: Gustav Resch, Andre Ortner, Sebastian Busch, Thomas Faber, Reinhard Haas all Energy Economics Group, Vienna University of Technology Contact Web: http://eeg.tuwien.ac.at

More information

RENEWABLE ENERGY POLICY AND DEVELOPMENTS IN SPAIN

RENEWABLE ENERGY POLICY AND DEVELOPMENTS IN SPAIN RENEWABLE ENERGY POLICY AND DEVELOPMENTS IN SPAIN Xavier Labandeira Economics for Energy and rede, University of Vigo ASU Global Institute of Sustainability Phoenix, 30 October 2013 Obama Visits Ohio Factory

More information

Overview of Study Background of Study

Overview of Study Background of Study 1 Overview of Study Background of Study A fresh approach to the topic of capacity markets a study at a European level Involvement of 15 European stakeholders as members Year-long project started in January

More information

Green, WhiteandBrown Certificates working together: the Italian Experience

Green, WhiteandBrown Certificates working together: the Italian Experience Green, WhiteandBrown Certificates working together: the Italian Experience Fiorenza Carraro Giorgio Panella Andrea Zatti Department of Public and Territorial Economics University of Pavia Tradable certificates

More information

Short characterisation of the model Green-X

Short characterisation of the model Green-X Short characterisation of the model Green-X Year of implementation: Client: Consortium: Publications / Web: 2002-2004 European Commission, DG Research; FP5 Programme (ENG2-CT- 2002-00607) Project co-ordinator:

More information

ECONOMIC TRENDS OF ITALIAN ELECTRICITY SECTOR SHORT TERMS STATISTICS

ECONOMIC TRENDS OF ITALIAN ELECTRICITY SECTOR SHORT TERMS STATISTICS NEWSLETTER January - March 2017 ECONOMIC TRENDS OF ITALIAN ELECTRICITY SECTOR SHORT TERMS STATISTICS In the first three months of 2017 data of national electricity sector has shown an increase in electricity

More information

WWF recommendations for cap levels for Phase 2 of the EU ETS

WWF recommendations for cap levels for Phase 2 of the EU ETS WWF International Groe Präsidentenstr. 10 10178 Berlin Germany Tel.: +49-30-308742-0 Direkt: -21 Fax: +49-30-308742-50 teriete@wwf.de www.panda.org Tough caps on CO 2 WWF recommendations for cap levels

More information

LIBERALISATION OF THE ELECTRICITY MARKET AND ENVIRONMENTAL POLICY ISSUES: SYNERGY OR CONTROVERSY

LIBERALISATION OF THE ELECTRICITY MARKET AND ENVIRONMENTAL POLICY ISSUES: SYNERGY OR CONTROVERSY LIBERALISATION OF THE ELECTRICITY MARKET AND ENVIRONMENTAL POLICY ISSUES: SYNERGY OR CONTROVERSY Stefan Speck, Vierthalergasse 6, 1120 Vienna, Austria Abstract 1 The adoption of the European Parliament

More information

EU Approach to Modelling the Impacts of Response Measures. Pre-sessional experts meeting 23 November, 2005 Montréal

EU Approach to Modelling the Impacts of Response Measures. Pre-sessional experts meeting 23 November, 2005 Montréal EU Approach to Modelling the Impacts of Response Measures Pre-sessional experts meeting 23 November, 2005 Montréal Overview EU s approach towards modelling on impacts of response measures Key findings

More information

Impact of RES on the ancillary services EPCC 11 th International Workshop, Altea Spain

Impact of RES on the ancillary services EPCC 11 th International Workshop, Altea Spain RED ELÉCTRICA DE Impact of RES on the ancillary services EPCC 11 th International Workshop, Altea Spain May 24th 2011 Abril 2007 Dirección de Operación Index Introduction to RES Impact of RES on the ancillary

More information

Wind Turbines in Spaniards Electricity Bill

Wind Turbines in Spaniards Electricity Bill Wind Turbines in Spaniards Electricity Bill Alejandro Velez Isaza Energy Economics and Policy ETH - Zürich - 2011 Introduction Electricity has become one of the most important products we use in our lives.

More information

B. S. Fisher and M. D. Hinchy Australian Bureau of Agricultural and Resource Economics, Canberra, Australia

B. S. Fisher and M. D. Hinchy Australian Bureau of Agricultural and Resource Economics, Canberra, Australia IMPACTS OF ENERGY TAXES AND SUBSIDIES B. S. Fisher and M. D. Hinchy Australian Bureau of Agricultural and Resource Economics, Canberra, Australia Keywords: energy taxes, energy subsidies, price gap approach

More information

The EU electricity market: renewable energy targets, Tradable. Green Certificates and international trade

The EU electricity market: renewable energy targets, Tradable. Green Certificates and international trade The EU electricity market: renewable energy targets, Tradable Green Certificates and international trade Ourania Karakosta and Dimitra Petropoulou October 015 Abstract Several EU member states have introduced

More information

UNIVERSITY OF MALTA THE MATRICULATION EXAMINATION ADVANCED LEVEL

UNIVERSITY OF MALTA THE MATRICULATION EXAMINATION ADVANCED LEVEL UNIVERSITY OF MALTA UNIVERSITY OF MALTA THE MATRICULATION EXAMINATION ADVANCED LEVEL ECONOMICS MAY 2016 EXAMINERS REPORT Part 1: Statistical Information AM EXAMINERS REPORT MAY 2016 Table 1 shows the distribution

More information

6) Consumer surplus is the red area in the following graph. It is 0.5*5*5=12.5. The answer is C.

6) Consumer surplus is the red area in the following graph. It is 0.5*5*5=12.5. The answer is C. These are solutions to Fall 2013 s Econ 1101 Midterm 1. No guarantees are made that this guide is error free, so please consult your TA or instructor if anything looks wrong. 1) If the price of sweeteners,

More information

World Small Hydropower Development Report 2013

World Small Hydropower Development Report 2013 World Small Hydropower Development Report 2013 www.smallhydroworld.org SPAIN Disclaimer Published in 2013 by United Nations Industrial Development Organization (UNIDO) and International Center on Small

More information

CURRENT THEMES IN INTERNATIONAL AND EU CLIMATE POLICY. (June 2013)

CURRENT THEMES IN INTERNATIONAL AND EU CLIMATE POLICY. (June 2013) CURRENT THEMES IN INTERNATIONAL AND EU CLIMATE POLICY (June 2013) The need for a strict, global climate treaty Global negotiations on the new emission reduction agreement, which is to take effect in 2020,

More information

Assessment of European RES policy pathways beyond 2020 results of the quantitative assessment of RES policy pathways beyond 2020

Assessment of European RES policy pathways beyond 2020 results of the quantitative assessment of RES policy pathways beyond 2020 Authors: Gustav Resch1, Pablo del Rio2, Mario Ragwitz3, Sebastian Busch1, Andre Ortner1 1Energy Economics Group, Vienna University of Technology, Austria 2Consejo Superior de Investigaciones Científicas,

More information

30/10/2013. The Belgian TIMES model

30/10/2013. The Belgian TIMES model 30/10/2013 The Belgian TIMES model 1.1 General overview: history» INTERNATIONAL DIMENSION» Developed by ETSAP implementing agreement of IEA as successor of MARKAL» History of 30 years development» Software

More information

Engaging consumers in a decarbonized world with the right pricing

Engaging consumers in a decarbonized world with the right pricing Engaging consumers in a decarbonized world with the right pricing BEHAVE 2016 Coimbra, 9 th of September of 2016 Ana Quelhas Director of Energy Planning Department ana.quelhas@edp.pt Agenda Achieving decarbonization

More information

Engineering, Economics and Regulation of the Electric Power Sector TERM PAPERS

Engineering, Economics and Regulation of the Electric Power Sector TERM PAPERS Engineering, Economics and Regulation of the Electric Power Sector Spring term 2010 Instructor: Ignacio J. Pérez-Arriaga Course number: ESD.934, 6.974 TERM PAPERS Logistics Papers can be prepared individually

More information

When the Wind Blows Over Europe European Experiences with RES

When the Wind Blows Over Europe European Experiences with RES When the Wind Blows Over Europe European Experiences with RES Harvard electricity Policy Group Fifty-Second Plenary Session Chicago, 02-03 October 2008 Hannes Weigt Chair of Energy Economics and Public

More information

Chapter 2 The Evolution of the Demand for Primary Energy and Electricity in Spain

Chapter 2 The Evolution of the Demand for Primary Energy and Electricity in Spain Chapter 2 The Evolution of the Demand for Primary Energy and Electricity in Spain In the past, electricity production in Spain was most dependent on coal, but it transitioned quite rapidly to gas after

More information

STUDY ON ECONOMIC AND ENVIRONMENTAL IMPACTS OF ENERGY TAXATION: SUMMARY AND CONCLUSIONS DG TAXUD C5

STUDY ON ECONOMIC AND ENVIRONMENTAL IMPACTS OF ENERGY TAXATION: SUMMARY AND CONCLUSIONS DG TAXUD C5 STUDY ON ECONOMIC AND ENVIRONMENTAL IMPACTS OF ENERGY TAXATION: SUMMARY AND CONCLUSIONS DG TAXUD C5 Background The scope of the study was to update the impact assessment of the Commission 1997 energy tax

More information

Written Statement by Mark Higson for the German Parliamentary Committee on Economic Affairs and Energy hearing (17 June 2015) on:

Written Statement by Mark Higson for the German Parliamentary Committee on Economic Affairs and Energy hearing (17 June 2015) on: Written Statement by Mark Higson for the German Parliamentary Committee on Economic Affairs and Energy hearing (17 June 2015) on: Taking action against subsidies for the construction of new nuclear power

More information

Renewables instead of Nuclear

Renewables instead of Nuclear Renewables instead of Nuclear On the Improvement of the British Renewable Energy Policy Rudolf Rechsteiner, economist Ph. D 1 Content 1. Introduction...1 2. Shortfalls of the Quota/ROC system...1 3. Proposal

More information

Search markets: Introduction

Search markets: Introduction Search markets: Introduction Caltech Ec106 (Caltech) Search Feb 2010 1 / 16 Why are prices for the same item so different across stores? (see evidence) A puzzle considering basic economic theory: review

More information

EU Best Practice in RES: Wind Energy in Demark

EU Best Practice in RES: Wind Energy in Demark EU Best Practice in RES: Wind Energy in Demark October 2003 European Commission (Directorate-General for Energy and Transport) Contract no. NNE5/2002/52: OPET CHP/DH Cluster TITLE: EU Best Practice in

More information

La regulación del incierto futuro de los sistemas eléctricos

La regulación del incierto futuro de los sistemas eléctricos La regulación del incierto futuro de los sistemas eléctricos Foro XM-2017 El futuro de la energía eléctrica en Colombia 25 de mayo, Cartagena, Colombia Carlos Batlle https://energy.mit.edu/profile/carlos-batlle

More information

Counter activations in PICASSO. Overview of the options and their implications

Counter activations in PICASSO. Overview of the options and their implications Counter activations in PICASSO Overview of the options and their implications Contents 1 Introduction... 3 2 Options... 3 2.1 Option 1: No limitation of counter Activation... 4 2.2 Option 2: Complete avoidance

More information

Universal Service in the 21 st Century

Universal Service in the 21 st Century Universal Service in the 21 st Century By Martin Duckworth, Director, Coleago Consulting Ltd. This article was initially published in the ITU TELECOM ASIA 2004 Daily News and On-Line News Service. Executive

More information

This policy brief addresses the issue of the complementarity of policies

This policy brief addresses the issue of the complementarity of policies f briefing paper No. 8/October 6, 2014 The promotion of renewable energy innovation When State intervention and competition go hand in hand 1 This policy brief addresses the issue of the complementarity

More information

Estonia Energy efficiency report

Estonia Energy efficiency report Estonia Energy efficiency report Objectives: 2.1 TWh of end-user energy savings by 2016 25% share of renewables in final energy consumption by 2020 4.8% share of renewables in electricity production by

More information

Tough caps on CO 2 (UPDATED VERSION JUNE 06)

Tough caps on CO 2 (UPDATED VERSION JUNE 06) WWF International Groe Präsidentenstr. 10 10178 Berlin Germany Tel.: +49-30-308742-0 Direkt: -21 Fax: +49-30-308742-50 teriete@wwf.de www.panda.org Tough caps on CO 2 (UPDATED VERSION JUNE 06) WWF recommendations

More information

A Sustainable Energy Future for Australia

A Sustainable Energy Future for Australia A Sustainable Energy Future for Australia Dr Mark Diesendorf Institute of Environmental Studies University of New South Wales m.diesendorf@unsw.edu.au Collapse of Larsen B ice shelf, Antarctica 1 Australian

More information

A Planned Course Statement for. Economics, AP. Length of Period (mins.) 41 Total Clock Hours: 123. Periods per Cycle: 6 Length of Course (yrs.) 1.

A Planned Course Statement for. Economics, AP. Length of Period (mins.) 41 Total Clock Hours: 123. Periods per Cycle: 6 Length of Course (yrs.) 1. East Penn School District Secondary Curriculum A Planned Course Statement for Economics, AP Course # 266 Grade(s) 12 Department: Social Studies Length of Period (mins.) 41 Total Clock Hours: 123 Periods

More information

Bio-energy and the European Pulp and Paper Industry An Impact Assessment

Bio-energy and the European Pulp and Paper Industry An Impact Assessment Bio-energy and the European Pulp and Paper Industry An Impact Assessment MCKINSEY & COMPANY, INC. AND PÖYRY FOREST INDUSTRY CONSULTING FOR CEPI Project Summary July 16, 2007 This document is a summary

More information

The PRIMES Energy Model

The PRIMES Energy Model EC4MACS Uncertainty Treatment The PRIMES Energy Model European Consortium for Modelling of Air Pollution and Climate Strategies - EC4MACS Editors: E3MLab, National Technical University of Athens (NTUA)

More information

Design options and critical issues of European GO Trade

Design options and critical issues of European GO Trade Design options and critical issues of European GO Trade Corinna Kleßmann Ecofys Germany International Feed-in Cooperation October 18, 2007 Background RE trade based on Guarantees of Origin (GOs) as proposed

More information

RES4LESS project - Romania as User of the renewables Cooperation Mechanisms

RES4LESS project - Romania as User of the renewables Cooperation Mechanisms RES4LESS project - Romania as User of the renewables Cooperation Mechanisms Cristian Tantareanu, ENERO c.tantareanu@enero.ro Francesco Dalla Longa, ECN dalla@ecn.nl www.res4less.eu 1 Outline EU 2020 renewables

More information

Economics 155/Earth Systems 112 Spring Final Exam

Economics 155/Earth Systems 112 Spring Final Exam Economics 55/Earth Systems Spring 006-07 Final Exam Instructions Do not open this exam before it is time to begin. If you are a graduating, write Grad on your first bluebook so we can get your grades submitted.

More information

An Electricity Trading System with Tradable Green Certificates and CO 2 Emission Allowances.

An Electricity Trading System with Tradable Green Certificates and CO 2 Emission Allowances. An Electricity Trading System with Tradable Green Certificates and CO Emission Allowances. Anna Widerberg Abstract Combinations of various policy instruments to deal with the threat of climate change are

More information

Renewables in Electricity Markets

Renewables in Electricity Markets 31761 - Renewables in Electricity Markets Exercise session 1: Day-ahead electricity markets [SOLUTION] The aim of this exercise session is to appraise and better understand the basic structure of electricity

More information

The Iberian Electricity Market - Impacts on power producer profits, consumer surplus and social welfare in the wholesale market

The Iberian Electricity Market - Impacts on power producer profits, consumer surplus and social welfare in the wholesale market ENERGEX 10 th International Energy Forum 2004 Energy & Society: 3 6 May 2004, Lisbon, Portugal The Iberian Electricity Market - Impacts on power producer profits, consumer surplus and social welfare in

More information

Sectoral Approaches in Electricity

Sectoral Approaches in Electricity INTERNATIONAL ENERGY AGENCY Delivering a broader carbon market after Copenhagen Richard Baron Head of climate change unit, IEA Objective: delivering CO 2 mitigation in power generation globally Identifying

More information

Efficient RES-E Support in Europe and its Impact on the Conventional Power Market

Efficient RES-E Support in Europe and its Impact on the Conventional Power Market Institute of Energy Economics at the University of Cologne Efficient RES-E Support in Europe and its Impact on the Conventional Power Market IAEE International Conference June 22nd, 2009 San Francisco

More information

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT. Accompanying the documents

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT. Accompanying the documents EUROPEAN COMMISSION Brussels, 11.7.2012 SWD(2012) 214 final COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the documents Proposal for a regulation of the European

More information

The EC package on the energy and climate framework - Target and coordination

The EC package on the energy and climate framework - Target and coordination The EC package on the energy and climate framework - Target and coordination A power industry perspective CEPS Carbon Market Forum Bruxelles, January 27 th, 2014 Daniele Agostini Head of Low Carbon Policies

More information

Country profiles: Italy

Country profiles: Italy Country profiles: Italy Last updated: date (31/05/2015) 1 Implementation of Tracking Systems 1.1 Electricity Disclosure Obligation to disclose was transposed through the Decree-Law No.73 of 18 th June

More information

Fortum s policy messages. April 2015

Fortum s policy messages. April 2015 Fortum s policy messages April 2015 Content 3. Introduction 4. Fortum s mission, strategy and values 5. Our current geographical presence 6. Our view on the future energy system 7. Our core beliefs 8.

More information

4.0 THE carbonasset. an excellent understanding of the concepts of additionality and baseline;

4.0 THE carbonasset. an excellent understanding of the concepts of additionality and baseline; 4.0 THE carbonasset The main quality concern in the PCF project cycle is environmental additionality and the credibility of a project s future emission reductions. Ensuring the quality of the carbon asset

More information