Application: RES-E Promotion

1. Policy Background

2. Efficiency Considerations

3. Numerical Framework (ELEC-MR)

4. Policy Analysis

1. Policy Background

• Two strategies to promote RES-E in Europe:

- Feed-in tariff systems with differentiated (technology-specific) subsidies

- Quota obligations with trade (TGCs:= tradable green certificates)

Alternative RES-E Promotion Schemes

Feed-in tariffs

Key question: Price tag for additional objectives than greening of electricity (additional costs of differentiated feed-in)?

Green quotas

+ Flexibility (easily adjustable)

+ Low risk for investors

+ Serves additional targets

(industrial / regional policy goals)- Demands „well informed“ regulation- Danger of over-funding (rent seeking)- Potentially high excess costs

+ Little information requirements

+ Efficient de-centralized mechanism

- Risk and uncertainties about future

market developments

- „Hurdles“ for infant technologies

2. Efficiency Considerations

Uniform feed-in tariff

(eq. regional quota)Diversified feed-in tariff

Additional Cost of Diversified Feed-In

3. Numerical Framework

ELEC-MR: Basic Model Structure

Supply

Company 1

Company 2 . . . Company n

Region 2

Region r

Residential demand - Base-load - Peak-load

Industrial demand - Base-load - Peak-Load

Residential demand - Base-load - Peak-load

Industrial demand - Base-load - Peak-Load

Supply

Company 1

Company 2 . . . Company n

Region 1

T

• Static (short-term) representation of EU electricity markets

• Cournot competition among EU power companies

ELEC-MR: Parametrization

• 23 countries (EU-25 without Malta and Cyprus)

• 1160 power plants

– 11 representative technologies

– Detailed bottom-up Information on costs

• 210 companies

Supply:

• 23 countries (EU-25 without Malta and Cyprus)

• Residential and industrial electricity demand

– Load-specific demand pattern (base, peak)

– Elastic demand (demand elasticities for 4 segments: industrial-base, industrial-peak, residential-base, residential-peak)

Demand:

4. Policy Analysis

Illustrative Policy Scenarios

Results (1): EU Technology Mix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BaU FEED_D FEED_H QUOTA_R QUOTA_EU

Share in total production [in %]

Nuclear Soft Coal and Lignite Hard Coal Natural Gas

Fuel Oil Hydro Biomass Wind

Solar Other RES

Results (2): RES-E Mix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FEED_D FEED_H QUOTA_R QUOTA_EU

Share in total RES-E production [in %]

Hydro power Solid Biomass Other Biomass Waste

Solar PV and Solarthermal Wind onshore Wind offshore Other RES-E

Results (3): Economic Indicators