Abstract
Abstract The dominant transitional path towards a low carbon electricity industry for systems which have been heavily dependent upon coal is through its replacement by large scale wind farms and the widespread emergence of distributed solar. In this pathway, maintaining resource adequacy in the context of increased intermittency in generation has become a major concern. This paper examines this requirement to maintain resource adequacy and compare the costs and carbon impacts for new gas turbines or biomass conversions to achieve this in an expedient transitional way. This is formulated as a policy optimization in which the imperative is to replace existing coal with a renewable alternative (in this case study, wind) and to maintain the system security at the existing level, and thereby find the optimal subsidies, either as energy credits (“green certificates” or “contracts-for-differences”) or capital benefits (“capacity payments” or tax allowances). In a model of the GB system, the results show that biomass-conversion outperforms investment in peaking gas turbines to deal with the transitional economic externality of extra reserve costs. In particular, the results suggest benefits of 10% lower costs of subsidies, 70% lower implied costs of carbon, and a reduction of 18% in wholesale power prices.
Highlights
Managing the transition of a carbon-intensive electricity industry towards low, or zero, carbon emissions has become a delicate balance of policy initiatives and long-term commitments
In a model of the GB system, the results show that that biomass-conversion outperforms investment in peaking gas turbines to deal with the transitional economic externality of extra reserve costs
Whilst the main result of this modelling is with regard to the value of biomass conversions, compared to new open cycle gas turbines" (OCGTs) facilities, for maintaining security during a coal phase-out, these results show that subsidies need to be slightly higher if they are paid as energy benefits compared to capital grants
Summary
Managing the transition of a carbon-intensive electricity industry towards low, or zero, carbon emissions has become a delicate balance of policy initiatives and long-term commitments. Whilst their introduction has been driven by policy determination and subsidies [18], an externality of both of these intermittent technologies is the need for extra reserve This paper examines this requirement to maintain resource adequacy and compare the costs and carbon impacts for new gas turbines or biomass conversions to achieve this in an expedient transitional way. This is formulated as a policy optimization in which the imperative is to replace existing coal with a renewable alternative (in this case study, wind) and to maintain the system security ("outages") at the existing level, and thereby find the optimal subsidies, either as energy credits ("green" certificates or “contracts-for-differences”) or capital benefits ("capacity payments", grants or tax allowances).
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