National Renewable Policies in an International Electricity Market

National Renewable Policies in an International Electricity Market: A Socio-Technical Study

Iychettira, K.K. (TU Delft Energie and Industrie)

Weijnen, M.P.C. (promotor)
Hakvoort, R.A. (copromotor)

Delft University of Technology
KTH Royal Institute of Technology
Comillas Pontifical University

2018-04-06

The current regulatory framework under which the support schemes for Renewable energy sources specifically for electricity (RES-E) operate, is provided for by the Directive 2009/28/EC. It sets a 20% target for energy consumption, while relying on legally binding, national targets until 2020. The goal to promote RES-E, in the European context, coexists with goals of ensuring a single internal market for electricity, and security of supply in the European Union, and these simultaneous goals are not always congruent with each other.
Today, significant amounts of intermittent RES-E in the energy mix have led to unintended effects. An important consequence is the so called ‘merit-order effect’, where the spot market electricity price reduces to the extent by which the renewable electricity generation displaces demand along the merit order. There is concern that part of the merit order effect spreads across national borders. Vitally, implications of the merit order effect on the effectiveness of RES-E support schemes are unclear. Another important effect of the price reduction is that, the lower the average electricity market price, the greater the costs of subsidies, making the phasing out of subsidies for renewable, intermittent sources more difficult.
With respect to electricity fromrenewable sources, this achievement of the three objectives took the shape of "making renewable support schemes more market-based", "ensuring renewables are driven bymarket signals". However, it is not often clearwhat is meant by such statements in policy documents by the EC. What features of the support scheme are being referred to? What would it mean for renewables solely to be driven
by market signals? How would features of support schemes impact for instance, the merit order effect, and vice-versa? These issues are encapsulated in the first problem addressed in the thesis: to unravel the interactions between renewable support scheme design and a single isolated electricity spotmarket, with a long termperspective.
Since countries are now increasingly interconnected, the secondmajor issue tackled in this thesis concerns cross border effects due to different renewable support schemes between neighbouring countries in a common electricity market. This issue addresses concerns about the merit-order effect spreading across national borders, and the ensuing distributional implications.
The final issue addressed in this dissertation relates to the long term economic viability of electricity fromrenewable sources given the current institutional and physical setting they operate in. Costs of renewable technologies have dropped dramatically and yet effects such as their reducing market value lead to questions about whether it is possible for them to attain economic viability in a decarbonised power sector. Accordingly, the main research question in this dissertation is:
How do national renewable electricity support schemes interact with the electricity market over the long term (20-30 years) as the European Union transitions to a decarbonized energy system?

RES-E
policy design
support schemes
renewable electricity
agent-based modelling
investment
electricity
cross-border effects
IAD framework

https://doi.org/10.4233/uuid:d247e271-3321-4661-b29a-08070ae9090f

978-94-6233-904-0

Institutional Repository

doctoral thesis

© 2018 K.K. Iychettira