TY - JOUR A1 - Lehmann, Paul A1 - Creutzig, Felix A1 - Ehlers, Melf-Hinrich A1 - Friedrichsen, Nele A1 - Heuson, Clemens A1 - Hirth, Lion A1 - Pietzcker, Robert T1 - Carbon lock-out: Advancing renewable energy policy in Europe JF - Energies N2 - As part of its climate strategy, the EU aims at increasing the share of electricity from renewable energy sources (RES-E) in overall electricity generation. Attaining this target poses a considerable challenge as the electricity sector is “locked” into a carbon-intensive system, which hampers the adoption of RES-E technologies. Electricity generation, transmission and distribution grids as well as storage and demand response are subject to important path dependences, which put existing, non-renewable energy sources at an advantage. This paper examines how an EU framework for RES-E support policies should be designed to facilitate a carbon lock-out. For this purpose, we specify the major technological, economic and institutional barriers to RES-E. For each of the barriers, a policy review is carried out which assesses the performance of existing policy instruments and identifies needs for reform. The review reveals several shortcomings: while policies targeting generation are widely in place, measures to address barriers associated with electricity grids, storage and demand are still in their infancy and have to be extended. Moreover, the implementation of policies has been fragmented across EU Member States. In this respect, national policies should be embedded into an integrated EU-wide planning of the RES-E system with overarching energy scenarios and partially harmonized policy rules. KW - carbon lock-in KW - demand management KW - electricity KW - energy policy KW - feed-in tariff KW - electricity generation KW - grids KW - renewable energy sources KW - storage Y1 - 2012 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22972 SN - 1996-1073 VL - 5 IS - 2 SP - 323 EP - 354 ER - TY - JOUR A1 - Ueckerdt, Falko A1 - Hirth, Lion A1 - Luderer, Gunnar A1 - Edenhofer, Ottmar T1 - System LCOE: What are the costs of variable renewables? JF - Energy N2 - Levelized costs of electricity (LCOE) are a common metric for comparing power generating technologies. However, there is criticism particularly towards evaluating variable renewables like wind and solar PV power based on LCOE because it ignores variability and integration costs. We propose a new metric System LCOE that accounts for integration and generation costs. For this purpose we develop a new mathematical definition of integration costs that directly relates to economic theory. As a result System LCOE allow the economic comparison of generating technologies and deriving optimal quantities in particular for VRE. To demonstrate the new concept we quantify System LCOE from a simple power system model and literature values. We find that at high wind shares integration costs can be in the same range as generation costs of wind power and conventional plants in particular due to a cost component “profile costs” captured by the new definition. Integration costs increase with growing wind shares and might become an economic barrier to deploying VRE at high shares. System LCOE help understanding and resolving the challenge of integrating VRE and can guide research and policy makers in realizing a cost-efficient transformation towards an energy system with potentially high shares of variable renewables. KW - Renewable energy KW - Integration costs KW - Levelized costs of electricity (LCOE) KW - Power generation economics KW - Market integration Y1 - 2013 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22942 SN - 0360-5442 VL - 63 SP - 61 EP - 75 PB - Elsevier Ltd ER - TY - JOUR A1 - Edenhofer, Ottmar A1 - Hirth, Lion A1 - Knopf, Brigitte A1 - Pahle, Michael A1 - Schlömer, Steffen A1 - Schmid, Eva A1 - Ueckerdt, Falko T1 - On the Economics of Renewable Energy Sources JF - Energy Economics N2 - With the global expansion of renewable energy (RE) technologies, the provision of optimal RE policy packages becomes an important task. We review pivotal aspects regarding the economics of renewables that are relevant to the design of an optimal RE policy, many of which are to date unresolved. We do so from three interrelated perspectives that a meaningful public policy framework for inquiry must take into account. First, we explore different social objectives justifying the deployment of RE technologies, including potential co-benefits of RE deployment, and review modelbased estimates of the economic potential of RE technologies, i.e. their socially optimal deployment level. Second, we address pivotal market failures that arise in the course of implementing the economic potential of RE sources in decentralized markets. Third, we discuss multiple policy instruments curing these market failures. Our framework reveals the requirements for an assessment of the relevant options for real-world decision makers in the field of RE policies. This review makes it clear that there are remaining white areas on the knowledge map concerning consistent and socially optimal RE policies. KW - Energy KW - Mitigation KW - Integrated assessment modeling KW - Variable renewables KW - Electricity market design KW - Renewable policy Y1 - 2013 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22965 SN - 0140-9883 N1 - This is a post-peer-review, pre-copyedit version of an article published in Energy Economics. The final authenticated version is available online at: DOI 10.1016/j.eneco.2013.09.015 VL - 40 IS - S1 SP - S12 EP - S23 ER - TY - JOUR A1 - Hirth, Lion A1 - Ueckerdt, Falko T1 - Redistribution Effects of Energy and Climate Policy: The Electricity Market JF - Energy Policy N2 - Energy and climate policies are usually seen as measures to internalize externalities. However, as a side effect, the introduction of these policies redistributes wealth between consumers and producers, and within these groups. While redistribution is seldom the focus of the academic literature in energy economics, it plays a central role in public debates and policy decisions. This paper compares the distributional effects of two major electricity policies: support schemes for renewable energy sources, and CO2 pricing. We find that the redistribution effects of both policies are large, and they work in opposed directions. While renewables support transfers wealth from producers to consumers, carbon pricing does the opposite. More specifically, we show that moderate amounts of wind subsidies can increase consumer surplus, even if consumers bear the subsidy costs. CO2 pricing, in contrast, increases aggregated producer surplus, even without free allocation of emission allowances; however, not all types of producers benefit. These findings are derived from an analytical model of electricity markets, and a calibrated numerical model of Northwestern Europe. Our findings imply that if policy makers want to avoid large redistribution they might prefer a mix of policies, even if CO2 pricing alone is the first-best climate policy in terms of allocative efficiency. KW - Carbon tax KW - Emission trading KW - Redistribution KW - Consumer surplus KW - Producer surplus KW - Wind power generation KW - Electricity market modeling Y1 - 2013 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22886 SN - 0301-4215 N1 - This is a post-peer-review, pre-copyedit version of an article published in Energy Policy. The final authenticated version is available online at: DOI 10.1016/j.enpol.2013.07.055 VL - 62 SP - 934 EP - 947 PB - Elsevier Ltd ER - TY - JOUR A1 - Hirth, Lion T1 - The market value of variable renewables: The effect of solar wind power variability on their relative price JF - Energy Economics N2 - This paper provides a comprehensive discussion of the market value of variable renewable energy (VRE). The inherent variability of wind speeds and solar radiation affects the price that VRE generators receive on the market (market value). During windy and sunny times the additional electricity supply reduces the prices. Because the drop is larger with more installed capacity, the market value of VRE falls with higher penetration rate. This study aims to develop a better understanding on how the market value with penetration, and how policies and prices affect the market value. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and the calibrated model of the European electricity market EMMA. We find the value of wind power to fall from 110% of the average power price to 50–80% as wind penetration increases from zero to 30% of total electricity consumption. For solar power, similarly low value levels are reached already at 15% penetration. Hence, competitive large-scale renewable deployment will be more difficult to accomplish than as many anticipate. KW - Variable renewables KW - Wind and Solar power KW - Market integration of renewables KW - Electricity markets KW - Intermittency KW - Cost-benefit analysis Y1 - 2013 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22900 SN - 0140-9883 N1 - This is a post-peer-review, pre-copyedit version of an article published in Energy Economics. The final authenticated version is available online at the DOI 10.1016/j.eneco.2013.02.004. VL - 38 SP - 218 EP - 236 PB - Elsevier B.V. ER - TY - JOUR A1 - Hirth, Lion A1 - Ziegenhagen, Inka T1 - Wind, Sonne, und Regelleistung BT - Zeitschrift für Energiewirtschaft, Recht, Technik und Umwelt JF - Energiewirtschaftliche Tagesfragen : et Y1 - 2013 UR - https://www.neon-energie.de/Hirth-Ziegenhagen-2013-Wind-Sonne-Regelleistung.pdf SN - 0013-743X - 0720-6240 IS - 10 SP - 59 PB - EW Medien und Kongresse GmbH CY - Frankfurt am Main ET - 13 ER - TY - CHAP A1 - Hirth, Lion A1 - Ueckerdt, Falko ED - Stolten, Detlef ED - Scherer, Viktor T1 - The Decreasing Market Value of Variable Renewables: Integration Options and Deadlocks T2 - Transition to Renewable Energy Systems KW - variable renewables KW - market value KW - integration costs Y1 - 2013 SN - 978-3527332397 SN - 9783527673872 U6 - https://doi.org/10.1002/9783527673872.ch6 SP - 75 EP - 92 PB - Wiley VCH CY - Oxford ER - TY - THES A1 - Hirth, Lion T1 - The Economics of Wind and Solar Variability – How the Variability of Wind and Solar Power affects their Marginal Value, Optimal Deployment, and Integration Costs T2 - Die Ökonomik von variabler Wind- und Solarenergie: ökonomischer Wert, optimaler Ausbau und Integrationskosten von Wind- und Solarstrom KW - Wind power KW - Solar power KW - Power system economics KW - Integration costs KW - Intermittency Y1 - 2014 U6 - https://doi.org/10.14279/depositonce-4291 PB - Technical University of Berlin CY - Berlin ER - TY - JOUR A1 - Hirth, Lion T1 - The Optimal Share of Variable Renewables: How the Variability of Wind and Solar Power affects their Welfare-optimal Deployment JF - The Energy Journal N2 - This paper estimates the welfare-optimal market share of wind and solar power, explicitly taking into account their output variability. We present a theoretical valuation framework that consistently accounts for the impact of fluctuations over time, forecast errors, and the location of generators in the power grid on the marginal value of electricity from renewables. Then the optimal share of wind and solar power in Northwestern Europe's generation mix is estimated from a calibrated numerical model. We find the optimal long-term wind share to be 20%, three times more than today; however, we also find significant parameter uncertainty. Variability significantly impacts results: if winds were constant, the optimal share would be 60%. In addition, the effect of technological change, price shocks, and policies on the optimal share is assessed. We present and explain several surprising findings, including a negative impact of CO2 prices on optimal wind deployment. KW - Wind power KW - Solar power KW - Variable renewables KW - Cost-benefit analysis KW - Numerical optimization KW - Competitiveness Y1 - 2015 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22832 SN - 1944-9089 VL - 36 IS - 1 SP - 127 EP - 162 ER - TY - JOUR A1 - Hirth, Lion T1 - The Market Value of Solar Power: Is Photovoltaics Cost-Competitive? JF - IET Renewable Power Generation N2 - This paper reviews the economics of solar power as a source of grid-connected electricity generation. It is widely acknowledged that costs of solar power have declined, but there is disagreement how its economic value should be calculated. ‘Grid parity’, comparing generation costs to the retail price, is an often used yet flawed metric for economic assessment, as it ignores grid fees, levies, and taxes. It also fails to account for the fact that electricity is more valuable at some points in time and at some locations than that at others. A better yardstick than the retail price is solar power's ‘market value’. This paper explains why, and provides empirical estimates of the solar market value from a literature review, German spot market analysis, and the numerical electricity market model EMMA. At low penetration rates (<2–5%) solar power's market value turns out to be higher than the average wholesale electricity price – mainly, because the sun tends to shine when electricity demand is high. With increasing penetration, the market value declines – the solar premium turns into a solar penalty. In Germany, the value of solar power has fallen from 133% of the average electricity price to 98% as solar penetration increased from zero to 4.7%. This value drop is steeper than wind power's value drop, because solar generation is more concentrated in time. As a consequence, large-scale solar deployment without subsidies will be more difficult to accomplish than many observers have anticipated. KW - power markets KW - pricing KW - power grids KW - solar power stations KW - photovoltaic power systems KW - power generation economics Y1 - 2015 U6 - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:b1570-opus4-22844 SN - 1752-1416 VL - 9 IS - 1 SP - 37 EP - 45 ER -