TY - JOUR A1 - Hirth, Lion A1 - Ueckerdt, Falko A1 - Edenhofer, Ottmar T1 - Why Wind is not Coal: On the Economics of Electricity Generation JF - The Energy Journal N2 - Electricity is a paradoxical economic good: it is highly homogeneous and heterogeneous at the same time. Electricity prices vary dramatically between moments in time, between location, and according to lead-time between contract and delivery. This three-dimensional heterogeneity has implication for the economic assessment of power generation technologies: different technologies, such as coal-fired plants and wind turbines, produce electricity that has, on average, a different economic value. Several tools that are used to evaluate generators in practice ignore these value differences, including "levelized electricity costs", "grid parity", and simple macroeconomic models. This paper provides a rigorous and general discussion of heterogeneity and its implications for the economic assessment of electricity generating technologies. It shows that these tools are biased, specifically, they tend to favor wind and solar power over dispatchable generators where these renewable generators have a high market share. A literature review shows that, at a wind market share of 30-40%, the value of a megawatt-hour of electricity from a wind turbine can be 20-50% lower than the value of one megawatt-hour as demanded by consumers. We introduce "System LCOE" as one way of comparing generation technologies economically. KW - Power generation KW - Electricity sector KW - Integrated assessment modeling KW - Wind power KW - Solar power KW - Variable renewables KW - Integration costs KW - Welfare economics KW - Power economics KW - Levelized electricity cost KW - LCOE KW - Grid parity Y1 - 2016 UR - https://opus4.kobv.de/opus4-hsog/frontdoor/index/index/docId/2282 UR - https://nbn-resolving.org/urn:nbn:de:kobv:b1570-opus4-22828 SN - 1944-9089 VL - 37 IS - 3 SP - 1 EP - 27 ER -