When Low Market Values are No Bad News: On the Coordination of Renewable Support and Real-Time Pricing

24 Pages Posted: 11 Sep 2015 Last revised: 13 Sep 2015

See all articles by Michael Pahle

Michael Pahle

Potsdam Institute for Climate Impact Research (PIK)

Wolf-Peter Schill

German Institute for Economic Research (DIW Berlin)

Christian Gambardella

Potsdam-Institut für Klimafolgenforschung (PIK)

Oliver Tietjen

Potsdam Institute for Climate Impact Research (PIK); Technical University of Berlin

Multiple version iconThere are 2 versions of this paper

Date Written: September 10, 2015

Abstract

We analyze the interactions between different renewable support schemes and the benefits of real-time pricing (RTP) using a stylized economic model with a detailed demand-side representation calibrated to the German market. We find that there are considerable differences between a market premium on energy and capacity regarding wholesale prices, support levies and market values, which are all related to induced negative wholesale prices in case of the former. This comes along with overall higher welfare as it allows RTP consumers to increase their consumption in periods of high renewable availability. Moreover, increasing RTP shares also incurs higher welfare gains in case of a premium on energy, with the deployment-relevant group of consumers that switch from a flat-rate tariff to RTP benefiting most. Our analysis thus puts the widespread notion that higher market values are instrumental for the deployment of high shares of RES into perspective.

Keywords: D02; Q21; Q28; Q42; Q58

JEL Classification: RES support schemes, demand side response, market value, negative prices, Germany

Suggested Citation

Pahle, Michael and Schill, Wolf-Peter and Gambardella, Christian and Tietjen, Oliver, When Low Market Values are No Bad News: On the Coordination of Renewable Support and Real-Time Pricing (September 10, 2015). USAEE Working Paper No. 15-222. Available at SSRN: https://ssrn.com/abstract=2658739 or http://dx.doi.org/10.2139/ssrn.2658739

Michael Pahle (Contact Author)

Potsdam Institute for Climate Impact Research (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Wolf-Peter Schill

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Christian Gambardella

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Oliver Tietjen

Potsdam Institute for Climate Impact Research (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Technical University of Berlin ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

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