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We explore the impact of renewable energy under free market conditions on the security of energy supply using data for the German electricity market. We design a fundamental electricity market model, where renewable energy capacity is not driven by expansion goals, but is dynamically modeled as an economically-driven investment option. Furthermore,...
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... subsection presents the projection of the electricity market based on our dataset. This projection is used as our reference scenario in the subsequent policy analysis. Fig. 1 shows the projection of installed capacity. It can be seen that projected conventional and RE power plant capacity exhibit little fluctuation between 2016 and 2022. There are hardly any investments in new capacity and the majority of decommissionings are due to power plants reaching the end of their life cycle. In 2022, the NPV ...
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... the first nine years, CO 2 emissions amount to around 250 Megatons per year. From 2025 onwards, the merit order effect of RE (and the resulting displacement of conventional power plants) lead to an almost complete elimination of carbon emissions (see Fig. ...
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... exceeds demand, redundant power plants are not allowed to offer their capacities on the market. Based on this allocation of production capacities, the profitability of power plants is again modeled by utilizing the LDCM (see Section 3.1.1). By assumption, conventional power plants are subsidized (and are not decommissioned due to losses). Fig. 12 demonstrates how the development of conventional power plant capacity in the regulated RE adaptation policy scenario differs from the regular market designs applied in the previous scenarios. There are now considerably more gas and oil power plants in the market. Compared to other conventional power plant technologies (such as lignite ...
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... 80,000 1,00,000 1,20,000 1,40,000 1,60,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Installed mechanism. Over the entire period under consideration, there is always sufficient supply to meet demand. Through the planned phasing out of nuclear energy, carbon emissions rise until 2022 (see Fig. 13). After that, emissions decline and lie between approximately 125 and 210 million tons per year (originating primarily from the operation of CO 2 -intensive lignite power plants in the market). The observed decrease of emissions during the last years of our investigation (between 2031 and 2035) is attributed to an increase in RE supply ...
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... emit little CO 2 ). While the German Federal Government [53] has decided on phasing out nuclear energy (and this has been incorporated in the simulation), this policy scenario allows for the possibility of investments in new nuclear energy in the future in case of demand shortages (as those depicted in the reference scenario, see Section 3.1.3). Fig. 14 shows the monetary costs associated with this scenario; from 2023 onwards, subsidies support RE through the FIT mechanism, and later on (after 2027) also base load power plants (e.g. lignite and hard coal) that run losses. This is because the RE adaptation design gives preference to medium or peak load power plants, which are better ...
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... 2016 to 2022, the development of power plant capacity in the freemarket RE adaptation policy scenario is similar to the regulated RE adaptation scenario (Fig. 15). However, due to the assumption that RE competes in the free market, the NPV optimization results in large investments in wind energy in 2023. This additional wind energy leads to the merit order effect, by which the electricity price drops to almost zero; as a result of this, and after five years of operation and consecutive losses, ...
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... conventional power plants dominating energy production between 2016 and 2022, annual CO 2 emissions lie between approximately 200 and 250 million tons (Fig. 16). The high wind energy investments in the following years lead to the displacement of conventional power plants, with CO 2 emissions dropping close to zero. In 2028 and 2034, all RE power plants are decommissioned for economic reasons, which gives rise to a temporary increase in carbon emissions (from conventional power plants). In the ...
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... rise to a temporary increase in carbon emissions (from conventional power plants). In the free market RE adaptation policy scenario, we assume that RE power plants participate in the free market and become decommissioned when running sustained losses for a period of 5 consecutive years. For this reason, there are no subsidies directed to RE. As Fig. 17 demonstrates, conventional power plants, however, need substantial subsidies from 2029 onwards. This is due to all conventional power plants sustaining economic losses due to the merit order effect of RE. While this effect consecutively leads to decommissionings of wind power plants in 2028, conventional power plants remain in the ...
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... average external costs per MWh produced for each generation technology based on data from Krewitt and Schlomann [58] [63]. These external costs are then multiplied by the production volumes of the corresponding power plant technologies in each policy scenario. Table 2 provides an overview of the external costs that we assumed for our simulations. Fig. 19 and Table 1 show that the total external costs of the five policy scenarios are in the range between approximately €46 and 78 billion. The market conditions for RE are a defining factor behind these differences. Both in the standard and in the regulated RE adaptation policy scenario, where RE is subject to an FIT mechanism, the costs ...
Citations
... The German biogas industry is undergoing a transition, emphasizing electricity production and the declining sale of biomethane as a fuel [95]. Recent years have witnessed a substantial cost reduction in wind and solar energy, aligning with Germany's commitment to renewable energy [96]. The country's shift towards a tendering system and economic competitiveness in renewable energy contribute to its mainstream adoption [97,98]. ...
The emerging energy transition is particularly described as a move towards a cleaner, lower-carbon system. In the context of the global shift towards sustainable energy sources, this paper reviews the potential and roadmap for hydrogen energy as a crucial component of the clean energy landscape. The primary objective is to present a comprehensive literature overview, illuminating key themes, trends, and research gaps in the scientific discourse concerning hydrogen production and energy policy. This review focuses particularly on specified geographic contexts, with an emphasis on understanding the unique energy policies related to renewable energy in Brazil, Austria, and Germany. Given their distinct social systems and developmental stages, this paper aims to delineate the nuanced approaches these countries adopt in their pursuit of renewable energy and the integration of hydrogen within their energy frameworks. Brazil exhibits vast renewable energy potential, particularly in wind and solar energy sectors, positioning itself for substantial growth in the coming years. Germany showcases a regulatory framework that promotes innovation and technological expansion, reflecting its highly developed social system and commitment to transitioning away from fossil fuels. Austria demonstrates dedication to decarbonization, particularly through the exploration of biomethane for residential heating and cooling.
... Based on duality theory, we can derive the day-ahead and real-time nodal prices under CED and SED, respectively, from the CED problem (1-2) and the SED problem (3). The detailed derivations are provided in Appendix A. We can then derive the mathematical expressions of the profit of conventional generators, the profit of renewable generators, and the market surplus, under both CED and SED, in Appendix B. It is remarkable that if the dispatch decisions of CED and SED are supposed to be identical, the differences in their expressions of those three performance metrics are shown as (5). ...
The stochastic economic dispatch (SED) provides a promising solution for short-term cost-efficiency with high renewable penetration. However, the long-term efficiency of SED, i.e., promoting efficient investments in both flexibility resources and renewable generations, has rarely been studied. We theoretically reveal the financial incentives for efficient investments in SED from both perspectives of the short-term and long-term performances: 1) We demonstrate the rationality behind the short-term failure of cost recovery or revenue adequacy, which provides proper signals to corresponding dispatchable generators, renewable generators, or system operator for long-term reconstruction and installation. 2) Through theoretical analysis of the statistical properties, we prove that the long-term expected profits of renewable and dispatchable generators provide appropriate signals to guide their future investments. In conclusion, the SED can indeed motivate the investments of flexibility resources and renewables to match up better with each other in the network, benefiting the system efficiency and reliability in the long run. Simulations are conducted for validation.
... Renewable energy source (RES) could substantially contribute to security of supply in the electricity systems (Peter and Wagner, 2021). However, RES expansion to maintain an uninterrupted security of supply requires profound changes in energy market design and regulation, given the existing fragmented structure of RES technology sector (Abadie et al., 2020;Coester et al., 2018;Valentine, 2011). ...
In recent years, the number of countries affected by deep geopolitical crises has grown, with global economic effects and implications on energy. The ongoing Russia-Ukraine conflict has highlighted the energy security of supply problems that characterize the European Union, heavily dependent on imported fossil sources from Russia. Italy is still very dependent on foreign energy imports. In this framework, it is crucial to investigate how much issues related to energy security have been considered by Italian governments to protect country's economic interests. The aim of this paper is to analyze to what extent energy security issues have been addressed in Italian energy policies and what actions have been implemented, using a content analysis approach. We have analyzed the reports published by Italian energy authorities in the period 2000-2020. According to our findings, several actions have been undertaken to address security of supply in Italy. The country is trying to diversify its fossil fuel mix and suppliers, even if a higher coordination among policy intervention is required. Several indicators such as CO2 emissions and geographical origin of imports confirm the difficulty to substitute fossil fuels usage in economic activities. However, other indicators, such as renewable energy sources consumption and carbon intensity of industry consumption show a positive trend. The results obtained reveal useful insights into changing policy priorities in security of supply.
... Some electricity market modelling studies considered a free market condition for renewable electricity generation in recent years. For instance, Coester et al. (2018) modelled the expansion of renewable electricity as an economically driven investment option in Germany, contrasting with other approaches that consider the policy-based expansion goals as the driving factor. In their modelling approach, they also analysed the effect of five policy scenarios on the future of the electricity market to secure the supply. ...
... There are also some other approaches to model prices. For example, [12] uses a load duration curve and merit order approach to evaluate the economics of renewable expansion, but this approach may not be very well suited when there is increased amounts of storage in the system. ...
... We then provide a path forward for a quick-ramping power plant investment (i.e., coal and LNG plants) to reach the pressing GHG emissions reduction goal. VRE expansion has led to incremental shifts in the energy system, namely the adoption of batteries [31], implementation of Power-to-X production (e.g., hydrogen) [32e35], and changes in market structures [36], The next step is factor in all these gradual changes and aggregate their net effects to examine the long-term impacts they will bring into the energy system. Due to the fact that Korea has four distinct seasons, this is of utmost importance to comprehend Korea's seasonally varying demand curve and to investigate its monthly fluctuating supply from VRE assets. ...
According to the Renewable Energy 3020 Implementation Plan announced in 2017 by the South Korean government, the electricity share of renewable energy will be expanded to 20% of the total electricity generation by 2030. Given the intermittency of electricity generation from renewable energy, realization of such a plan presents challenges to managing South Korea's isolated national electric grid and implies potentially large excess electricity generation in certain situations. The purpose of this study is: 1) to develop a model to accurately simulate the effects of excess electricity generation from renewables which would arise during the transition, and 2) to propose strategies to manage excess electricity generation through effective utilization of domestic electricity generating capabilities. Our results show that in periods of greater PV and wind power, namely the spring and fall seasons, the frequency of excess electricity generation increases, while electricity demand decreases. This being the case, flexible operation of coal and nuclear power plants along with LNG and pumped-storage hydroelectricity can be used to counterbalance the excess electricity generation from renewables. In addition, nuclear energy plays an important role in reducing CO2 emissions and electricity costs unlike the fossil fuel-based generation sources outlined in the 8th Basic Plan.
... Gilbert et al. (2018) stated that computation models, including simulation models, can be utilized to initiate, develop, and evaluate policies due to the policy development cycle's complexity and variability (see HM Treasury 2013). There have been a number of works about simulation-based policy evaluation in various domains, such as economics (Coester et al. 2018;Yun & Moon 2020), demographics (Kim et al. 2017;Singh et al. 2018), and public health (Barbrook-Johnson et al. 2017;Bae et al. 2018). This research trend has also appeared in urban administrative studies using traffic simulations: for example, Adelt et al. (2018) argued that traffic simulation could be applied to analyze the governance of complex sociotechnical systems, but their efforts ended up being a conceptual framework and a virtual small example. ...
... Por su parte, los bajos precios a los que se oferta la generación renovable pueden desencadenar problemas relacionados con la seguridad de suministro. Estos problemas se refieren al desplazamiento de recursos más costosos en el despacho de electricidad, lo que podría ocasionar salida de recursos tradicionales y confiables, y por tanto, una capacidad de generación insuficiente, o poco estable, para satisfacer la demanda eléctrica futura [14]- [17]. ...
... Este tipo de problemas puede asociarse al diseño de mercado [14]. En el mercado colombiano, por ejemplo, donde el despacho de electricidad funciona por mérito, algunos autores han advertido que esta problemática podría ocurrir bajo una alta penetración de FRNC [18], [19]. ...
... En este artículo se sostiene la hipótesis de que los diseños de mercados, así como los esquemas de fijación de precios de oferta, pueden ser clave para alivianar los problemas asociados con la entrada de FRNC a los mercados eléctricos. Si bien, existen trabajos anteriores que ofrecen hipótesis similares [10], [14], [16], este trabajo contribuye con el análisis de esta hipótesis a través de la construcción de un modelo de simulación y un conjunto de indicadores de desempeño aplicados a un caso de estudio de un mercado hidrotérmico. Por lo tanto, se desarrolla un modelo de simulación dinámica en el que se implementan y evalúan diferentes esquemas de fijación de precios, permitiendo identificar su desempeño ante diferentes escenarios de penetración de FRNC. ...
An important technological transformation is taking place in the electricity markets. Increases in the use of non-conventional renewable sources for electricity generation is challenging the system reliability, especially from the suppliers perspective. This context stands out the need to seek market designs and electricity pricing schemes that favor the proper functioning of markets, contributing to the system sustainability and social welfare. This work develops a simulation model that allows evaluating different electricity market designs and pricing schemes under different scenarios of non-conventional renewable sources penetration, using the Colombian electricity market as an application case. Schemes are evaluated under six indicators including price volatility, maximum electricity prices, unattended system demand, average usage of thermal sources, CO2 emissions and generation surpluses. Model results reveal that the market designs and pricing schemes that use levelized costs of electricity provide a favorable performance of the electricity market when the installed capacity of renewable sources increases, considering price volatilities, system CO2 emissions and demand coverage.
... With the ongoing complex energy transition from high-carbon towards low-carbon systems and an increasing share of renewable energy sources (RES), a stable operation of the electricity system is at risk [10][11][12]. While RES such as wind and solar photovoltaics (PV) allow for a more sustainable generation of electricity and are therefore a means to combat climate change [13], they are, however, also highly variable [14]. ...
... While RES such as wind and solar photovoltaics (PV) allow for a more sustainable generation of electricity and are therefore a means to combat climate change [13], they are, however, also highly variable [14]. The limited controllability of RES threatens the stable operation of future electricity systems, potentially leading to an increase in the costs of system operation when a high level of energy security is desired [11]. For instance, costs for grid interventions and in-feed management reached 1.2 billion Euros in 2019 in Germany [15]. ...
The energy sector provides fuel for much of everyday life, particularly economically and socially. Fighting against the COVID-19 pandemic, a well-functioning and resilient energy sector is vital for maintaining the operation of critical infrastructures, including, most importantly, the health sector, and timely economic recovery. Notwithstanding its importance in everyday life and crises, the energy sector itself is currently in a complex and far-reaching transformation to combat climate change whilst supporting the transition to a low-carbon economy and society, mainly through the development of variable renewable energy sources (RES) such as wind and solar photovoltaics. This paper highlights the need for energy resilience as countries face the triple challenge of the COVID-19 health crisis, the consequent economic crisis, and the climate crisis. Focusing on Europe, it is advanced here that with the ability to balance fluctuating electricity generation and demand, flexibility allows the energy sector to utilise low-carbon RES reliably, ensuring a more resilient and sustainable energy future. This paper derives five urgent policy recommendations for Europe that address possible impacts of COVID-19 on the economic and societal prerequisites for flexibility in energy systems.
... Therefore, to make proper comparisons, it is necessary to take into account all types of expenses, not only investment, fuel, maintenance, and operation costs of the power plants, but most importantly, the external costs of electricity generation [37,38]. External costs are those incurred by third parties and future generations to produce energy, rather than the expenditures of direct recipients and providers of electricity [39,40]. Incorporating those costs in electricity market prices would contribute to the use of more modern and cleaner energy sources [28,41,42], while the most harmful technologies would be the first ones to be forced out of the market. ...
In many circles, brown coal continues to be viewed as a cheap source of energy, resulting in numerous investments in new opencast brown coal mines. Such a perception of brown coal energy is only possible if the external costs associated with mining and burning coal are not considered. In past studies, external cost analysis has focused on the external costs of coal burning and associated emissions. This paper focuses on the extraction phase and assesses the external costs to agriculture associated with the resulting depression cone. This paper discusses the difficulties researchers face in estimating agricultural losses resulting from the development of a depression cone due to opencast mineral extraction. In the case of brown coal, the impacts are of a geological, natural-climatic, agricultural-productive, temporal, and spatial nature and result from a multiplicity of interacting factors. Then, a methodology for counting external costs in crop production was proposed. The next section estimates the external costs of crop production arising from the operation of opencast mines in the Konin-Turek brown coal field, which is located in central Poland. The analyses conducted showed a large decrease in grain and potato yields and no effect of the depression cone on sugar beet levels. Including the estimated external costs in the cost of producing electricity from mined brown coal would significantly worsen the profitability of that production.
