Arbeitspapier
Why Wind Is Not Coal: On the Economics of Electricity
The economics of electricity is shaped by its physics. A well know example is the non-storability of electricity that causes its price to fluctuate widely. More generally, physical constraints cause electricity to be a heterogeneous good along three dimensions - time, space, and lead-time. Consequently, different generation technologies, such as coal and wind power, produce different economic goods that have a different marginal economic value. Welfare maximization or competitiveness analyses that ignore heterogeneity deliver biased estimates. This paper provides an analytical welfare-economic framework that accounts for heterogeneity for unbiased assessments of power generators. The framework offers a rigorous interpretation of commonly used cost indicators such as levelized electricity costs and grid parity. Heterogeneity is relevant for all generators, but especially for variable renewables such as wind and solar power. We propose a definition of variability, derive the opportunity costs of variability, and link that concept to the integration cost literature. A literature review shows that variability can reduce the value of wind power by 20-50%. Thus it is crucial that economic analysis accounts for the physics of electricity.
- Sprache
-
Englisch
- Erschienen in
-
Series: Nota di Lavoro ; No. 39.2014
- Klassifikation
-
Wirtschaft
Alternative Energy Sources
Allocative Efficiency; Cost-Benefit Analysis
Optimization Techniques; Programming Models; Dynamic Analysis
- Thema
-
Power Generation
Electricity Sector
Integrated Assessment Modeling
Variable Renewables
Integration Costs
Welfare Economics
Power Economics
Levelized Electricity Cost
Grid Parity
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hirth, Lion
Ueckerdt, Falko
Edenhofer, Ottmar
- Ereignis
-
Veröffentlichung
- (wer)
-
Fondazione Eni Enrico Mattei (FEEM)
- (wo)
-
Milano
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Hirth, Lion
- Ueckerdt, Falko
- Edenhofer, Ottmar
- Fondazione Eni Enrico Mattei (FEEM)
Entstanden
- 2014
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