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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2014/17:
Rethinking how to support intermittent renewables

Patrick A. Narbel ()

Abstract: Intermittent renewable energy sources, including solar and wind power, typically remain more expensive than conventional power sources. As a consequence, few intermittent power projects would have been deployed if specific policy instruments had not been implemented. Existing policy instruments facilitating the deployment of intermittent renewable energy technologies include the feed-in tariff, the feed-in premium and the quota system. Based on a numerical analysis, it is shown that these specific policy instruments do not necessarily facilitate the deployment of valuable energy sources because they ignore the cost of intermittency. A valuable intermittent energy source is defined here as a source of energy which requires little financial support and which limits the need for capacity payments in order to ensure the security of supply. Based on insights from the numerical analysis, a new policy instrument is suggested: a multiplicative premium. This type of policy instrument would increase the likelihood that valuable intermittent energy assets are deployed in priority.

Keywords: Intermittent renewables; value of energy; security of supply; (follow links to similar papers)

JEL-Codes: Q40; Q50; (follow links to similar papers)

27 pages, April 14, 2014

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