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The Impact of Wind Power Support Schemes on Technology Choices Nils May In: Energy Economics 65 (2017), S. 343-354

Abstract:

In energy systems with large shares of variable renewable energies, electricity generation is lower during unfavorable weather conditions. System-friendly wind turbines (SFTs) rectify this by producing a larger share of their electricity at low wind speeds. This paper analyzes to what extent SFTs' benefits out-weigh their additional costs and how to incentivize investments into them. Using a wind power investment model for Germany, I show that SFTs indeed deliver benefits for the energy system that over-compensate for their cost premium. Floating market premium schemes incentivize their deployment only where investors bear significant price risks and possess sufficient foresight. Alternatively, a new production value-based benchmark triggers investors to install SFTs that meet the requirements of power systems with increasing shares of variable renewable energies.

JEL-Classification:

Q42;Q55;O38

Keywords:

Renewable energy, Wind power technology, Feed-in tariff, Project finance, Market premium, Policy evaluation, Market value