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Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing. / Kraan, Oscar; Kramer, Gert Jan; Nikolic, Igor; Chappin, Emile; Koning, Vinzenz.

In: Energy Policy, Vol. 131, 01.08.2019, p. 99-110.

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Kraan, Oscar ; Kramer, Gert Jan ; Nikolic, Igor ; Chappin, Emile ; Koning, Vinzenz. / Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing. In: Energy Policy. 2019 ; Vol. 131. pp. 99-110.

BibTeX

@article{13800ee21db54aac94c27b9259ea9ca7,
title = "Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing",
abstract = "Full decarbonisation of the electricity system is one of the key elements to limit global warming. As this transition takes place, the electricity system must maintain system adequacy and remain affordable to consumers. In liberalised electricity markets investors are seen as key actors driving this transition. Due to the intermittent character of renewable assets, such as wind or solar parks, electricity systems with large shares of renewable electricity will need to become increasingly flexible. Evaluating whether specific market designs provide the right incentives to invest in flexibility, requires the simulation of realistic investor behaviour. Agent-based modelling provides the means to explore heterogeneous, imperfectly informed and boundedly rational investor behaviour within different electricity market designs. We evaluated two market designs; “energy-only” markets and markets with a Capacity Remuneration Mechanism (CRM). We conclude that energy-only markets, even with strong carbon pricing, do not incentivise investors to deliver a fully renewable, reliable and affordable energy system. Therefore policy makers should focus on developing CRMs which can work in combination with market incentives to reach a fully renewable, reliable and affordable electricity system in the second half of this century.",
keywords = "Agent-based modelling, Electricity market design, Flexibility, Investor behaviour, Storage, Sustainability",
author = "Oscar Kraan and Kramer, {Gert Jan} and Igor Nikolic and Emile Chappin and Vinzenz Koning",
year = "2019",
month = "8",
day = "1",
doi = "10.1016/j.enpol.2019.04.016",
language = "English",
volume = "131",
pages = "99--110",
journal = "Energy Policy",
issn = "0301-4215",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing

AU - Kraan, Oscar

AU - Kramer, Gert Jan

AU - Nikolic, Igor

AU - Chappin, Emile

AU - Koning, Vinzenz

PY - 2019/8/1

Y1 - 2019/8/1

N2 - Full decarbonisation of the electricity system is one of the key elements to limit global warming. As this transition takes place, the electricity system must maintain system adequacy and remain affordable to consumers. In liberalised electricity markets investors are seen as key actors driving this transition. Due to the intermittent character of renewable assets, such as wind or solar parks, electricity systems with large shares of renewable electricity will need to become increasingly flexible. Evaluating whether specific market designs provide the right incentives to invest in flexibility, requires the simulation of realistic investor behaviour. Agent-based modelling provides the means to explore heterogeneous, imperfectly informed and boundedly rational investor behaviour within different electricity market designs. We evaluated two market designs; “energy-only” markets and markets with a Capacity Remuneration Mechanism (CRM). We conclude that energy-only markets, even with strong carbon pricing, do not incentivise investors to deliver a fully renewable, reliable and affordable energy system. Therefore policy makers should focus on developing CRMs which can work in combination with market incentives to reach a fully renewable, reliable and affordable electricity system in the second half of this century.

AB - Full decarbonisation of the electricity system is one of the key elements to limit global warming. As this transition takes place, the electricity system must maintain system adequacy and remain affordable to consumers. In liberalised electricity markets investors are seen as key actors driving this transition. Due to the intermittent character of renewable assets, such as wind or solar parks, electricity systems with large shares of renewable electricity will need to become increasingly flexible. Evaluating whether specific market designs provide the right incentives to invest in flexibility, requires the simulation of realistic investor behaviour. Agent-based modelling provides the means to explore heterogeneous, imperfectly informed and boundedly rational investor behaviour within different electricity market designs. We evaluated two market designs; “energy-only” markets and markets with a Capacity Remuneration Mechanism (CRM). We conclude that energy-only markets, even with strong carbon pricing, do not incentivise investors to deliver a fully renewable, reliable and affordable energy system. Therefore policy makers should focus on developing CRMs which can work in combination with market incentives to reach a fully renewable, reliable and affordable electricity system in the second half of this century.

KW - Agent-based modelling

KW - Electricity market design

KW - Flexibility

KW - Investor behaviour

KW - Storage

KW - Sustainability

UR - http://www.scopus.com/inward/record.url?scp=85065205030&partnerID=8YFLogxK

U2 - 10.1016/j.enpol.2019.04.016

DO - 10.1016/j.enpol.2019.04.016

M3 - Article

VL - 131

SP - 99

EP - 110

JO - Energy Policy

T2 - Energy Policy

JF - Energy Policy

SN - 0301-4215

ER -

ID: 53998837