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Decarbonizing electricity generation with intermittent sources of energy

Ambec, Stefan and Crampes, Claude (2019) Decarbonizing electricity generation with intermittent sources of energy. Journal of the Association of Environmental and Resource Economists, 6 (6). pp. 919-948.

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We examine policy instruments that aim to decarbonize electricity production by replacing fossil fuel energy with intermittent renewable sources, namely, wind and solar power. We consider a model of investment, production, and storage with two sources of energy: one is clean but intermittent (wind or solar), whereas the other one is reliable but polluting (thermal power). We first determine the first-best energy mix depending on the social cost of polluting emissions. We then show that, to implement the socially efficient energy mix without a carbon tax, feed-in tariffs and renewable portfolio standards must be complemented with a price cap and volume-limited capacity payments.

Item Type: Article
Language: English
Date: November 2019
Refereed: Yes
Uncontrolled Keywords: electricity, renewables, intermittency, storage, feed-in tariff, carbon emissions.
JEL Classification: D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
D61 - Allocative Efficiency; Cost-Benefit Analysis
Q41 - Demand and Supply
Q42 - Alternative Energy Sources
Q48 - Government Policy
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 27 May 2019 08:08
Last Modified: 31 Jul 2020 10:10
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