Affiliation:
1. University of Cambridge
2. Griffith University and Powerlink
Abstract
Abstract
Most countries have set challenging decarbonisation targets that will require high levels of Variable Renewable Electricity (VRE). The ratio of peak to average production is from 2-4 for wind and 4-11 for PV and so once market shares reach 50%, curtailment will be necessary, even if delayed by storage and exports. This article demonstrates theoretically and from market experience that marginal curtailment rates (the extra curtailment caused by the last MW installed) will be at least 3 times average curtailment rates. Free entry will be driven by average curtailment rates while in a fully efficient market without development constraints, entry should be driven by marginal curtailment. The article discusses possible policy and market design options to address this discrepancy and argues nevertheless for a pragmatic solution that decides capacity using marginal curtailment rates but encourages optimal entry levels using average curtailment, given the limits of infrastructure expansion.
JEL Codes: D52, D53, G12, L94, Q40
Publisher
Research Square Platform LLC
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