The Political Economy of Safe-guarding Security-of-supply with High Shares of Renewables
Synthesis of Existing Research and Lessons from the German Case
Renewable energy supply in the electricity sector (RES-E) is often intermittent and dependent on external factors such as wind speeds and solar radiation. The importance of intermittent generation in the European electricity markets requires a thorough understanding of the extent and the nature of security of supply problems. A crucial policy question is how regulators can address potential security of supply problems. Against this backdrop, the overall objective of the project is to synthesize the economics research on the nature and extent of intermittency problems in electricity markets, and discuss implications for how to deal with these in the regulation of the electricity market. Specifically, the project work will be divided into three tasks:
- Synthesize the existing research on the economics of intermittency in the electricity market, focusing on how the electric power system has been affected by increasing shares of RES-E generation and how this can be – and should be – dealt with in the regulation of the market.
- Analyze the drivers of the policy debate on intermittency in Germany, and not the least the extent to which the knowledge gained through previous research has been able to penetrate this debate (e.g., as evidenced in reports from interest organizations, recent policy proposals etc.). The potential consequences of failing to address important issues and trade-offs will be analyzed.
- Identify and discuss important lessons for the Swedish debate on how to address security of supply and intermittency concerns, e.g., through regulatory reforms, in the Nordic electricity market.
Germany is an interesting case, not only due to the rapid expansion of volatile RES-E, but also be-cause of the cooperation between system operators, the presence of market design reforms, and a vivid political debate on how to regulate the power system. In Sweden the German experiences have attracted a lot of attention, and this project can shed additional light on what can be learnt – and not learnt – from the German case and the policy debate. This should be valuable information for officials working with the electricity market and not the least for political decision-makers.