Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs?

Rethinking how to support intermittent renewables

“…The deployment of intermittent renewable energy also creates additional costs (Hiroux and Saguan, 2010). For example, the cost of balancing the system in the short-term is likely to increase when intermittent renewables are deployed as a result of more frequent rampingup and down of base-load power plants (Lund, 2005).…”

“…Compared to a feed-in tariff system, the FiP creates an incentive to produce electricity when it is needed most (Hiroux and Saguan, 2010;Gawel and Purkus, 2013) because the plant owner total remuneration will rise with increasing electricity prices. Everything else being equal, investors will favor projects which deliver electricity when prices are high, hence facilitating the integration of intermittent renewable energy into the electricity system (Langniss et al, 2009).…”

“…The first implication is that the prices faced by an intermittent power station owner need to be tied to wholesale market prices (Jaegemann, 2014;Gawel and Purkus, 2013), hence ruling out a feed-in tariff type instrument. Ideally, an intermittent power station owner should not have any incentive to produce electricity when market prices become negative (Hiroux and Saguan, 2010), hence ruling out additive policy instruments 11 . In addition, there is a benefit in forcing the production of electricity during high residual load 12 , because only the production of intermittent power during peak load can lead to a reduction in the capacity of dispatchable power needed to balance the market.…”

Promoting the market and system integration of renewable energies through premium schemes—A case study of the German market premium

“…As the exposure of intermittent RES to market risks will nevertheless result in higher risk premiums being demanded for investment, and therefore higher support costs, their inclusion in premium schemes is heavily debated (cf. Klessmann et al 2008;Hiroux & Saguan 2010;Batlle et al 2012). Limiting premium schemes to dispatchable RES would be an option to capture a significant part of the potential system integration benefits while limiting additional costs (Klessmann et al 2008;Consentec & R2B Energy Consulting 2010;Batlle et al 2012).…”

“…However, substituting a centralised energy system based on large-scale, base-load power plants for a mix of predominantly small-scale, decentralised renewable energy technologies, in which intermittent energy sources like wind and photovoltaics (PV) play an important role, poses considerable challenges for the efficiency and security of energy supply (BMU 2011;Neubarth 2011;Hiroux & Saguan 2010). To solve these, systemic approaches are necessary: apart from substituting fossil (and in the case of Germany, nuclear) energies for RES, a successful energy transformation requires investments in complementary conventional plants, an expansion of grid and storage capacities, as well as improvements in energy efficiency and energy savings (BMWi & BMU 2010).…”