Economic Bulletin , News of 24 November 2017

Incentives for the long-term integration of renewable energies: a plea for a market value model

Tobias Machhaus (Copyright)  Solar Solarenergie Sonnenenergie
Copyright: Tobias Machhaus

Due to increasing shares of renewable energies in electricity production, the cost-effective system integration of these installations is becoming more and more important. Technologies and locations are viewed as system-friendly when they are more cost-efficient and easier to integrate because they, unlike other installations, produce at times when electricity is more valuable. This report shows that project developers of renewable energies in Germany have had limited incentives to invest in system-friendly installations. A market value model is derived based on five criteria for the further development of support instruments. This model creates appropriate incentives for investments in system-friendly installation while simultaneously avoiding additional financial risks for project developers. With such an approach based on a market value factor, the support costs for renewable energies as well as for levies in the overall electricity system and for the energy transition in general can be minimized over the long-term. [...]

The full report by Karsten Neuhoff, Nils May, and Jörn Richstein in DIW Economic Bulletin 46+47/2017 | PDF, 311.02 KB