Market distortions in flexibility markets caused by renewable subsidies – The case for side payments

Höckner, Jonas; Voswinkel, Simon

doi:10.1016/j.enpol.2019.111135

Cited by 14 publications

(5 citation statements)

References 19 publications

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“…The first requirement is to ensure that VRE always bids its avoidable cost and hence ensures efficient dispatch. Höckner et al (2020) recognise this is a problem in the German market when addressing the need to redispatch to resolve the congestion constraint. Instead of calling for a redesign of the support scheme, they argue for side payments to offset the distortion of treating the support price, not the market price, as the opportunity cost.…”

Section: Designing Efficient Ress Contactsmentioning

confidence: 99%

Efficient Renewable Electricity Support: Designing an Incentive-compatible Support Scheme

Newbery¹

2023

The Energy Journal

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Most existing renewables support schemes distort location and dispatch decisions. Many impose unnecessary risk on developers, increasing support costs. Efficient policy sets the right carbon price, supports capacity not output, ensures efficient dispatch and location. The EU bans priority dispatch and requires market-based bidding, but does not address the underlying problem that payment is conditional on generation, amplifying incentives to locate in windy/sunny sites. This article identifies the various distortions and proposes an auctioned contract to address location and dispatch distortions: a financial Contract for Difference (CfD) with hourly contracted volume proportional to local renewable output/MW, with a life specified in MWh/MW, with long-term transmission contracts based on predicted output-weighted actual or simulated nodal prices. This yardstick CfD delivers efficient dispatch. It assures but limits the total subsidy. It does not over-pay for windy/sunny sites. The revenue assurance allows high debt:equity, dramatically lowering the subsidy cost.

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Section: Designing Efficient Ress Contactsmentioning

confidence: 99%

Efficient Renewable Electricity Support: Designing an Incentive-compatible Support Scheme

Newbery¹

2023

The Energy Journal

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“…Bian revealed that government investment effectively attracts private investors, improves the investment enthusiasm of firms, and has a significant impact on enterprise performance [26], which in turn helps to relieve the financial pressure on businesses and strengthens their economic performance. However, government subsidies can lead to market distortions and condone excessive resource consumption [27]. Kim suggests that company shortand long-term performance is impacted differently by government subsidization.…”

Section: Government Randd Subsidies and The Innovative Performance Of...mentioning

confidence: 99%

Improving the Innovative Performance of Renewable Energy Enterprises in China: Effects of Subsidy Policy and Intellectual Property Legislation

Chen

et al. 2022

Sustainability

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Energy efficiency and emissions reductions are effective initiatives to address climate change and energy security. China has increased government subsidies and intellectual property protection (IPP) intensity to promote technological innovation in the renewable energy sector. This paper selects samples of geothermal, wind, and solar energy companies and examines whether the two initiatives mentioned above can improve company innovation, and assesses their action pathways. The results reveal that: (i) government subsidies can directly facilitate renewable energy enterprises’ innovative performance, and research and development (R&D) input served as a medium; and (ii) the intensity of IPP moderation needed for geothermal and solar enterprises to utilize the government subsidy to enhance innovation. The government should consider the differences of different sub-sectors of renewable energy when increasing subsidies. Better laws and policies are needed to strengthen the protection of intellectual property rights and stimulate innovation in renewable energy enterprises.

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“…This literature can be considered a facet of environmental justice (Gianessi et al, 1979;Robinson, 1985;Parry & Small, 2005;Fullerton, 2008Fullerton, , 2011Bento, 2013). There are studies on the costs and/or benefits of renewable energy (Hwang, 2010;Ming et al, 2014;Yang et al, 2019;Höckner et al, 2020). However, currently, no study considers both the benefits and costs of renewable energy policy from a reallocation perspective among income groups.…”

Section: Introductionmentioning

confidence: 99%

“…Previous studies have examined the costs of cap and trade by income in absolute terms and as a share of household income. Hassett et al (2007) computed the effect of a national energy tax. They found that the ratio of energy expenditures to income decreases with income.…”

Section: Introductionmentioning

confidence: 99%

Is California’s Electric Vehicle Rebate Regressive? A Distributional Analysis

Graham

2022

J. Benefit Cost Anal.

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Economic incentives are in widespread use to stimulate the development of the electric vehicle industry. However, the distributional effects of such incentives have been subject to little empirical inquiry. This study examines how California’s electric vehicle rebate program impacts different income groups financially. Two effects are considered: the income distribution of rebate beneficiaries and the income distribution of the rebate payers. The results reveal that the overall net financial impacts of the electric vehicle rebate program are regressive: the benefit distribution is highly regressive while the cost distribution is slightly progressive. Recent efforts to improve the fairness of the rebate program do not alter our findings. Policy implications are discussed.

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Market distortions in flexibility markets caused by renewable subsidies – The case for side payments

Cited by 14 publications

References 19 publications

Efficient Renewable Electricity Support: Designing an Incentive-compatible Support Scheme

Efficient Renewable Electricity Support: Designing an Incentive-compatible Support Scheme

Improving the Innovative Performance of Renewable Energy Enterprises in China: Effects of Subsidy Policy and Intellectual Property Legislation

Is California’s Electric Vehicle Rebate Regressive? A Distributional Analysis

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