On the Transition of Europe’s Power Sector: Economic Consequences of National Targets

Authors: Geoffrey J. Blanford, Christoph Weissbart

Abstract:

The prospects for the European power sector indicate that it has to almost fully decarbonize in order to reach the economy-wide target of CO₂-emission reduction. We apply the EU-REGEN model to explain the penetration of RES from an economic perspective, their spatial distribution, and the complementary role of conventional generation technologies. Furthermore, we identify economic consequences of national energy and climate targets. Our study shows that onshore wind power will be the most crucial generation technology for the future European power sector. Its geographic distribution is driven by resource quality. Gas power will be the major conventional generation technology for backing-up wind power. Moreover, a complete phase out of coal power proves to be not economically optimal. The paper demonstrates that existing national targets have a negative impact, especially on the German region with higher prices and lower revenues. The remaining regions profit are hardly affected. We encourage an EU-wide coordination on the expansion of wind power with harmonized policies. Yet, this requires profitable market structures for both, RES and conventional generation technologies.

Keywords: European decarbonization pathway, power market investment, public policies, technology choice.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1131017

References:

[1] European Commission, “Impact Assessment: A Roadmap for moving to a competitive low carbon economy in 2050,” 2011.
[2] European Commission, “Impact Assessment: A policy Framework for climate and energy in the period from 2020 to 2030,” 2014.
[3] European Commission, “An Energy Policy for Europe,” 2007.
[4] European Commission, “Energy Roadmap 2050,” 2011.
[5] United Nations, “Adoption of the Paris Agreement,” 2015.
[6] Marcel Šúri, Thomas A. Huld, Ewan D. Dunlop, and Heinz A. Ossenbrink, “Potential of solar electricity generation in the European Union member states and candidate countries,” Solar Energy, vol. 81, no. 10, pp. 1295–1305, 2007.
[7] European Environment Agency, “Europe's onshore and offshore wind energy potential: An assessment of environmental and economic constraints,” 2009.
[8] K. Schaber, F. Steinke, P. Mühlich, and T. Hamacher, “Parametric study of variable renewable energy integration in Europe: Advantages and costs of transmission grid extensions,” Energy Policy, vol. 42, pp. 498–508, doi:10.1016/j.enpol.2011.12.016, 2012.
[9] K. Schaber, F. Steinke, and F. Hamacher, “Transmission grid extensions for the integration of variable renewable energies in Europe: Who benefits where?,” Energy Policy, vol. 43, pp. 123–135, doi:10.1016/j.enpol.2011.12.040, 2012.
[10] S. Becker, R. A. Rodriguez, G. B. Andresen, S. Schramm, and M. Greiner, “Transmission grid extensions during the build-up of a fully renewable pan-European electricity supply,” Energy, vol. 64, pp. 404–418, dio:10.1016/j.energy.2013.10.010, 2014.
[11] R. A. Rodriguez, S. Becker, G. B. Andresen, D. Heide, and M. Greiner, “Transmission needs across a fully renewable Europeanpower system,” Renewable Energy, vol. 63, pp. 467–476, doi:10.1016/j.renene.2013.10.005, 2014.
[12] M. Fürsch, S. Hagspiel, C. Jägermann, S. Nagel, D. Lindenberger, and E. Tröster, “The role of grid extensions in a cost - efficient transformation of the European electricity system until 2050,” 2012.
[13] B. Knopf, P. Nahmmacher, and E. Schmid, “The European renewable energy target for 2030 – An impact assessment of the electricity sector,” Energy Policy, vol. 85, pp. 50–60, doi:10.1016/j.enpol.2015.05.010, 2015.
[14] E. Schmid and B. Knopf, “Quantifying the long-term economic benefits of European electricity system integration,” Energy Policy, vol. 87, pp. 260–269, doi:10.1016/j.enpol.2015.09.026, 2015.
[15] D. Heide, L. von Bremen, M. Greiner, C. Hoffmann, M. Speckmann, and S. Bofinger, “Seasonal optimal mix of wind and solar power in a future, highly renewable Europe,” Renewable Energy, vol. 35, no. 11, pp. 2483–2489, doi:10.1016/j.renene.2010.03.012, 2010.
[16] L. Hirth, “The market value of variable renewables,” Energy Economics, vol. 38, pp. 218–236, doi:10.1016/j.eneco.2013.02.004, 2013.
[17] A. S. Brouwer, M. van den Broek, W. Zappa, W. C. Turkenburg, and A. Faaij, “Least-cost options for integrating intermittent renewables in low-carbon power systems,” Applied Energy, vol. 161, pp. 48–74, doi:10.1016/j.apenergy.2015.09.090, 2016.
[18] K. Schaber, F. Steinke, and T. Hamacher, “Managing Temporary Oversupply from Renewables Efficiently: Electricity Storage Versus Energy Sector Coupling in Germany,” 2013.
[19] F. Reitz, C. Gerbaulet, C. Kemfert, C. Lorenz, P.-Y. Oei, and C. von Hirschhausen, Szenarien einer nachhaltigen Kraftwerksentwicklung in Deutschland. Berlin: Deutsches Institut für Wirtschaftsforschung, 2014.
[20] P.-Y. Oei, C. Kemfert, F. Reitz, and C. von Hirschhausen, Braunkohleausstieg - Gestaltungsoptionen im Rahmen der Energiewende. Berlin: Deutsches Institut für Wirtschaftsforschung, 2014.
[21] Agora Energiewende, “Eleven Principles of Reaching a Consensus on Coal: Summary,” 2016.
[22] C. Jägemann, M. Fürsch, S. Hagspiel, and S. Nagl, “Decarbonizing Europe’s power sector by 2050 — Analyzing the economic implications of alternative decarbonization pathways,” Energy Economics, vol. 40, pp. 622–636, doi:10.1016/j.eneco.2013.08.019, 2013.
[23] T. Sattich, “Germany’s Energy Transition and the European Electricity Market: Mutually Beneficial?,” Journal of Energy and Power Engineering, vol. 8, pp. 264–273, doi:10.1109/EEM.2013.6607323, 2014.
[24] S. Kirsten, “Renewable Energy Sources Act and Trading of Emission Certificates: A national and a supranational tool direct energy turnover to renewable electricity-supply in Germany,” Energy Policy, vol. 64, pp. 302–312, doi:10.1016/j.enpol.2013.08.030, 2014.
[25] EPRI (Electric Power Research Institute), “PRISM 2.0: Regional Energy and Economic Model Development and Initial Application: US-REGEN Model Documentation,” 2013.
[26] G. J. Blanford, J. H. Merrick, and D. Young, “A Clean Energy Standard Analysis with the US-REGEN Model,” The Energy Journal, vol. 35, pp. 137–164, doi:10.5547/01956574.35.SI1, 2014.
[27] G. J. Blanford and C. Weissbart, “Modeling the Dynamics of the Future European Power Sector: The EU-REGEN Model,” 2016.