Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226806 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
ifo Working Paper No. 342
Publisher: 
ifo Institute - Leibniz Institute for Economic Research at the University of Munich, Munich
Abstract: 
Increasing shares of intermittent renewable energies challenge the dominant way to trade electricity ex-ante in forward, day-ahead, and intraday markets: Coal power plants and consumers cannot react to the stochastic element of renewables, whereas gas turbines can. We use a theoretical model to analyze consumer behavior and incentives of perfectly competitive firms to invest in different types of technologies under ex-ante pricing. Curtailed consumers need to get subsidized in high of their disruption cost. Coal power firms recover cost. Renewables and gas turbine firms fail to do so. We identify imperfections that arise from the delay in price setting and market clearing. Do real-time prices induce an efficient outcome? Consumers need to get taxed in high of rationing cost. Support is redundant for gas turbine firms, but renewables firms still fail to recover cost because they cannot ensure against their price risk.
Subjects: 
efficient pricing
market design
capacity mechanisms
renewable energies
supply uncertainty
consumer behavior
JEL: 
D41
D47
Q41
Q48
L94
L98
Document Type: 
Working Paper

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