Quantifying the Long‐Term Economic Benefits of European Electricity System Integration

22 Pages Posted: 25 Jan 2014

See all articles by Eva Schmid

Eva Schmid

Potsdam-Institut für Klimafolgenforschung (PIK)

Brigitte Knopf

Mercator Research Institute on Global Commons and Climate Change (MCC)

Date Written: January 24, 2014

Abstract

This paper analyses a set of model‐based decarbonization scenarios in order to quantify the long‐term economic benefits that arise from an increasing integration of the pan‐European electricity system. It thereby focuses on the interplay between transmission infrastructure and renewable generation capacity expansion. We confirm earlier findings that, on aggregate, pan‐European transmission capacity expansion constitutes a no‐regret option for integrating increasing shares of variable renewables in mitigation scenarios with positive social returns on investment. However, it turns out that the change in total discounted system costs that occurs as transmission capacity expansion increases is modest in magnitude, with a maximum of 3.5% for a case with no expansion compared to one with massive expansion. In technical terms this means that the optimum is rather flat and that taking into account regional and local benefits and distributional aspects, could alter the evaluation of the economic benefits considerably. A crucial finding in this context is that the configuration of pan‐European transmission infrastructure and the importance of specific country‐connections, i.e. a “Southern” versus a “Northern” solution, crucially hinges on the relative development of specific investment costs for solar and wind technologies over the next decades.

Keywords: Transmission Infrastructure Planning, European Energy Policy Targets, Mitigation

JEL Classification: Q42, Q48, Q54

Suggested Citation

Schmid, Eva and Knopf, Brigitte, Quantifying the Long‐Term Economic Benefits of European Electricity System Integration (January 24, 2014). FEEM Working Paper No. 3.2014, Available at SSRN: https://ssrn.com/abstract=2384544 or http://dx.doi.org/10.2139/ssrn.2384544

Eva Schmid (Contact Author)

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Brigitte Knopf

Mercator Research Institute on Global Commons and Climate Change (MCC) ( email )

Torgauer Straße 12-15
Berlin, 10829
Germany

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