Renewable Subsidies Research Articles

Electrification of residential and commercial buildings integrated with hybrid renewable energy systems: A techno-economic analysis

This study assesses the techno-economic viability of city-scale building electrification, comparing a base case scenario with conventional HVAC systems to an electrified scenario with heat pump systems. EnergyPlus simulations reveal a 28% increase in annual electricity consumption in the electrified scenario, shifting the peak consumption from summer to winter with a 49% surge. Hybrid renewable energy systems (HRESs) are then evaluated using HOMER Pro, considering renewable penetration from 0% to 100%. The net present cost (NPC) of the base case and electrified scenarios range from $10.34 to $24.38 billion and $8.79 to $50.31 billion, respectively. Sensitivity analysis explores the impact of carbon tax, fuel price, and renewable subsidies on HRESs in the electrified scenario. Results indicate that applying a carbon tax up to $120/tonne of CO2 increases the optimum renewable fraction from 5% to 26%, while higher fuel prices and renewable subsidies further enhance the feasibility by shifting the optimum renewable fraction to 60% and 54%, respectively, demonstrating the interplay between economic factors and renewable integration in electrified urban contexts.

The Energy Transition and Support for the Radical Right: Evidence from the Netherlands

Energy transition policies often have distributional effects that could have electoral consequences. I study this issue in the context of a Dutch policy change that increased taxes on household natural gas consumption and redistributed the revenues as subsidies for renewables. Radical right parties were the only source of political opposition. A Differences-in-Differences (DiD) analysis with panel data from 2007-2020 shows that after the policy change renters with individualized utility bills became 5–6 percentage points more likely to vote for the radical right compared to renters with utilities included in their rents. Renters with individualized utility bills also became relatively less sympathetic towards the Green party and more concerned about price increases but they did not alter their left-right self-placements nor their views on immigration or the European Union. A secondary analysis finds similar effects for individuals (including home-owners) who are energy poor. This suggests an emerging economically rooted political cleavage over energy transition policies.

Is larger really better? Productivity and firm size in European electricity generation sectors

Although a conventional wisdom claims that larger firms perform better than smaller ones, the conclusions drawn by the literature are ambiguous. This study examines the effect of firm size on productivity, using a dataset on European electricity generators from 2012 to 2020. European electricity generation sectors are particularly interesting given the substantial liberalisations in the past decades and strong subsidisation of electricity generated from renewables. Next to estimating productivity of electricity generators and establishing a link between firm size and performance in this industry, the analysis allows for heterogeneity of impacts of firm size on productivity across various dimensions (e.g., regulation scheme, state ownership), as firm size may attenuate or fuel associated problems and benefits. Besides, it adds to the literature by investigating whether and how renewable subsidies impact reallocation from the technically less efficient to the more productive firms, since they often favour smaller generators in European countries that might be less productive. The overall results highlight that firm size significantly boosts firm performance. Effects, however, diminish with size. Last, renewable subsidies deteriorate allocative efficiency. Hence, renewable subsidies favouring smaller generators are at the cost of allocative efficiency.

Environmental Policies and directed technological change

This article evaluates if and to which extent policy can steer innovation towards eco-friendly technologies. We construct a cross-country dataset on sectoral green innovation and complement it with data on policies designed to address environmental market failures: environmental taxes, regulation, and R&D subsidies. While all of these tools exert a positive effect on green innovation, our IV estimates reveal substantial heterogeneities across policies. Overall, green innovation reacts most strongly to R&D subsidies for renewables, but interaction effects between different policies need to be considered.

The impacts of consumer-funded renewable support schemes in the UK: From the perspective of consumers or the electricity sector?

Increased renewable electricity reduced electricity prices but the costs of consumer-funded support schemes were added to utility bills. Previous studies compared these two components to understand the impacts on consumers. This paper constructs a framework for the electricity sector and provides a new angle to examine the impacts of renewable support schemes on consumers and the sector, respectively. Any negative gain to consumers was offset by the positive gain received by renewable generators (and suppliers), leaving the sector unaffected. In contrast, the increase in renewable electricity brought positive gain to the sector as a whole through reduced fossil fuels imports and greenhouse gas (GHG) emissions. We examine the structural change in the generation mix from 2006 to 2020 in the UK and suggest that wind generation replaced coal-fired generation rather than gas-fired generation on the longer horizon. Therefore, using coal-related coefficients and a contribution share of 38.6% for renewable subsidies, we suggest that wind generation supported by the RO scheme brought positive net gain to the sector, exceeding £800 million per annum in 2018–19 and 2019–20. Therefore, the discrepancy in payoffs from the perspective of consumers and the sector imposed a difficult challenge for policymakers, as criticism would be raised if the analysis was done on consumers only.

Market dynamics and investment in the electricity sector

A transition to a low carbon future will include a medium-to-long run period in which intermittent renewables co-exist with conventional fossil fuel electricity generators. Fossil fuel generators have frequent startups and shut-downs during the transition. A dynamic competition model is developed that allows for costly cycling of conventional generators. We analyze long run effects of renewable subsidies and carbon prices in the Electric Reliability Council of Texas system using the dynamic model. Accounting for costly generator cycling leads to large changes in equilibrium outcomes and changes policy predictions. The dynamic model predicts higher subsidies or carbon taxes are required to achieve CO2 reduction targets compared to a static model without costly generator cycling. The dynamic model predicts the cost of CO2 reduction is 40 - 80% greater than the static model prediction. The dynamic model predicts a much larger gap between CO2 reduction costs for carbon taxes and renewable subsidies; $303 million/year, compared to a static model prediction of $209 million/year.

How to design renewable energy support policies with imperfect carbon pricing?

Based on the emission trading scheme (ETS), this study built a design framework of renewable energy support policies (RES), which is employed to assess the interaction between RES and ETS. For RES, we consider two policy instruments: feed-in-tariff (FIT) and renewable portfolio standards (RPS). Based on the partial equilibrium model, taking the case of China’s electricity market, this study quantitatively discusses the implementation effects of six different policy mix scenarios from three aspects: emission reduction, production of green electricity, and social welfare. According to the results, there were big differences among the implementation effects of different RES instruments based on ETS. The renewable subsidy policy, on the whole, is better than renewable portfolio standards in terms of emission reduction, but worse in terms of improving the production of green electricity. In addition, different from the renewable subsidy policy, the renewable portfolio standards can reduce social welfare. When the emission quota is eased, RES can be implemented to significantly improve social welfare. These simulation results inspire China for the design of effective energy policies.

Market-based hosting capacity maximization of renewable generation in power grids with energy storage integration

In an attempt to achieve net zero, the operation and planning of the energy system face techno-economic challenges brought by integrating large-scale distributed energy resources (DERs) with low carbon footprints. Previous work has analyzed the technical challenges including hosting capacity (HC) for DERs. In light of the deregulation of the power industry and the transition to power system with renewables at its center, this article takes the lead to maximizing renewable integration in power grids from a market viewpoint. It solves a significant problem brought forth by the fall in electricity prices, resulting from increasing renewable penetration that jeopardizes investment cost recovery and prevents sustainable grid integration of renewables. To this end, a novel bi-level optimization model is formulated, where the upper-level problem aims to maximize the HC of renewables ensuring the recovery of investment, and the lower-level problem describes the market clearing process considering network constraints. The optimal solution of devised bi-level problem can be found after reformulating it to a single-level mixed-integer linear problem (MILP) using the strong duality theorem and a special ordered set-type 1 (SOS1) founded linearization approach. Case studies confirm the significance of the devised model and quantitatively analyze the impact of different network capacities, renewable subsidies, and energy storage, respectively, on the market-based HC obeying its profitability constraint.

Roles of diffusion patterns, technological progress, and environmental benefits in determining optimal renewable subsidies in the US

In this paper we develop an integrated model to identify optimal subsidy schedules for clean energy technologies that maximize social benefits less subsidy costs. The model uses historical cost, adoption, and emissions data and accounts for both environmental and technological progress benefits of the subsidy. An alternative analytical model is also presented to analyze key technological features affecting subsidy design. We focus on three important factors in determining the social benefits of subsidizing the use of clean energy technology: the price (or cost) sensitivity of adoption, induced cost reductions through learning, and environmental benefits. We quantify how distinct profiles of these three factors result in qualitatively different optimal subsidy plans for utility wind and residential solar power in 13 electricity grid regions in the US. Results show that optimal subsidy schedules for utility wind depend on the region, starting at $20–60/MWh, and are roughly constant over time. In contrast, optimal residential solar subsidies either decline over time (starting from $8–70/MWh) or are not desirable (subsidy of zero). The results imply that the optimal subsidy for utility wind is justified mainly through the direct environmental benefits, unlike residential solar PV in which the subsidy is primarily justified by indirect technological progress benefits.

Hierarchical multi-objective design of regional integrated energy system under heterogeneous low-carbon policies

Fossil-to-renewable energy system transition is an inevitable future trend considering carbon dioxide emissions mitigation burdens. However, huge investment costs and insufficient policy support are still the two main barriers to further expand renewable energy penetration. To transcend these barriers, from the perspective of both policy makers and energy suppliers, this study simultaneously integrates low-carbon policy formulations and regional integrated energy system (IES) reshaping to achieve an affordable decarbonization pathways. Mixed Integer Quadratically-Constrained Programs (MIQCP) models are constructed, and hierarchical multi-objective optimization is applied to quantify local government's decision-making costs and energy suppliers' system transition costs. A new rural community in Dalian (China) is taken as a case study to capture the relationship among energy structure adjustment, energy system reshaping, and renewable subsidy and carbon tax adjustment under different CO2 emission reduction regulations. The result shows that under the same CO2 emission reduction rate, portfolio policies can benefit both the policy maker and the energy supplier by balancing the local government revenue and expenditure, and reducing the annual total costs of IES. In addition, via IESs optimization, a higher renewable energy penetration rate could be obtained and the energy supplier could achieve a competitive cost within 40% CO2 emission reduction targets.

Impact on the power mix and economy of Japan under a 2050 carbon-neutral scenario: Analysis using the E3ME macro-econometric model

ABSTRACT This study uses the E3ME macro-econometric model to simulate what Japan’s macroeconomy would look like and how Japan's energy composition would change if the country were to achieve carbon neutrality by 2050. The results indicate that renewable energy will account for about 90% of the power supply configuration in 2050, assuming nuclear power plants are phased out by 2040. It is also predicted that GDP will increase by 4.0%–4.5% compared with the baseline scenario and that employment will improve by 1.5%–2.0%, resulting in simultaneous achievement of carbon neutrality and economic growth. The main reasons for these projected outcomes are that increased investment in renewable generation capacity in the power sector would be accompanied by increased investment in decarbonization technologies across individual economic sectors, increased private consumption resulting from increased employment and energy efficiency savings, and an improvement in the trade balance due to a substantial reduction in fossil fuel imports. In addition, the costs of energy due to policies to reduce or eliminate carbon would rise by 45%–55% point at most above the baseline scenario even in 2050; however, this would be of little burden on the economy, considering the substantial reduction in fossil fuel energy demand. Overall, it is estimated that energy bills would be 45% lower for consumers and 11% lower for industry in 2050 compared with the baseline. Key policy insights The study shows that achieving climate neutrality does not require difficult trade-offs with economic growth. Instead, it can provide economic opportunities that arise from switching to renewables and decarbonization technologies. The rapid reduction in global renewable costs for wind and solar technologies means that the net zero transition does not have to rely on relatively more expensive nuclear power. The true costs of nuclear could be a lot higher when the costs of safety regulations are properly accounted for. Instead, investment in electricity storage should be prioritized. A well balanced decarbonization policy mix for each sector is required. Policy makers should not rely on carbon pricing instruments alone. Supporting policies such as R&D spending, renewable subsidies, regulations and energy demand reduction should also be considered.

The role of hydrogen in decarbonizing a coupled energy system

This paper examines the decarbonization of three coupled energy sectors: electricity, transport and heating/industry. The sector coupling includes the production of hydrogen from each of electricity via electrolysis, the gasification of coal and the reforming of natural gas; the displacement of gasoline/diesel and natural gas by any of these forms of hydrogen; the generation of electricity by gas turbines and reciprocating engines fuelled by either natural gas or any of these forms of hydrogen; and the electrification of the transport fleet. Plausible sensitivities to technological learning, energy efficiency measures, natural gas prices and subsidies for renewables are examined systematically as the coupled system’s total greenhouse gas emissions are reduced to zero.The observed transition to zero emissions finds significant uses for hydrogen from both electrolysis and fossil fuels with carbon capture and storage (CCS). Plausible rates of technological learning from today to 2050 dramatically reduce the total costs and the land area required for achieving deep abatement mainly due to the projected fall in the costs of wind, solar PV and electrolysis. The combination of hydrogen fuelled reciprocating engines, electrolysis and hydrogen gas storage is also observed to provide lower cost, long term electricity storage than batteries and pumped hydropower. Nonetheless, the marginal costs of reducing emissions beyond approximately 90% abatement relative to today are always more than 100 $/tCO2e and land use can increase dramatically. This suggests that negative emission technologies will likely have a role in achieving net-zero emissions in combination with widespread renewable deployment, technological learning and some continued fossil fuel use with CCS.

Intermittency in Wind Energy and Emissions from the Electricity Sector: Evidence from 13 Years of Data

Renewable subsidies and mandates currently play a central role in the environmental and energy policy in the United States, one of the world’s top greenhouse gas emitters. Therefore, accurately estimating the environmental benefits from wind energy is key to evaluating the existing policies and setting future directions and has been studied within a growing body of the literature. However, most of the existing studies do not take the intermittency into account, and the small number of studies that do only study a relatively short time period limiting the extent to which they can be informative within different ranges of wind generation capacity. In this paper, we present the first estimates of the environmental benefits of wind energy generation using a dataset that spans well over a decade. Specifically, we use 13 years of hourly and sub-hourly data to estimate the causal effect of wind generation and its intermittency on CO2, NOx, and SO2 emissions from the electricity sector in Texas. Additionally, we compared the full sample results to those from sub-samples where the dataset is divided into subgroups based on wind output level. We found that while wind generation clearly has a statistically significant negative marginal effect on all pollutants we studied, the marginal effect of intermittency varies across different wind output levels in a highly irregular way. Our findings suggest that conducting pooled analyses has the potential to mask the irregularity in the variation of the effect of intermittency in wind generation across different wind output levels.

Critical raw materials for the energy transition

Renewable energy generation and storage requires specialized capital goods, embedding critical raw materials (CRM). The scarcity of CRM therefore affects the transition from a fossil based energy system to one based on renewables, necessary to cope with climate change. We consider the issue in a theoretical model, where we allow for a very costly potential substitute, reflecting a backstop technology, and for partial and costly recycling of materials in capital goods. We characterize the main features of the efficient energy transition, and their dependence on the relative abundance of CRM and on the recycling technology. Recycling reduces the cost of the transition. It also calls for having a large stock of recyclable CRM embedded in specialized capital at the time of adoption of the backstop technology. Moreover, we consider constraints on policy tools and myopic regulation, and show how abstracting from the scarcity of CRM, or tightly linking subsidies for renewables to the carbon tax revenue, is misleading in designing climate policy.

Renewable support and strategic pricing in electricity markets

We show how policies to support clean technologies change price competition and market outcomes. We present evidence from electricity markets, where regulators have implemented different policies to subsidize clean energy. Building on a multi-unit auction model, we show that currently applied subsidy designs either foster or attenuate competition. Contract-based output subsidies decrease firms’ mark-ups. In contrast, market-based designs that subsidize clean output via a regulatory premium on the market price lead to higher mark-ups. We confirm this finding empirically using auction data from the Spanish power market. Our empirical results show that the design choice for renewable subsidies significantly impacts pricing behavior of firms and policy costs for consumers.

Avoided external energy costs due to penetration of renewables: Evidence form Baltic States

European Union (EU) has set ambitious energy and climate targets for the EU Member States. Some EU Member States (MS) confirmed to attain 100% of renewables in power generation by 2050 and implement carbon-free economy target. The purpose of this study is to assess and compare the avoided external costs of electricity generation due to the penetration of renewables in the Baltic States by implementing EU energy and climate targets for 2020, 2030 and 2050. The switching to renewables has significant social benefits for the EU member states, as fossil fuel burning is linked with the climate change and emission of classical air pollutants (SO2, NOx, particulate matter, NH3, NMVOC), which can have various negative impacts on the human health. The analysis and forecasts of external costs of power generation by 2050 in the selected countries, i.e., the Baltic States, has shown that Estonia is able to achieve the highest avoided external costs and highest health benefits from renewable promotion due to the oil shale that is dominating in the power generation structure. The main input of this study performed in the Baltic States is to show how subsidies for renewables correspond to the reduction of external costs of power generation and to provide important policy implications for these countries. Moreover, this can be an example for other countries how to assess the benefits of renewables support.

Renewable Electricity Development in China: Policies, Performance, and Challenges

Since 2006, China has experienced an unprecedented expansion of its wind and solar power generation capacity and associated manufacturing industries. This rapid growth was supported by large subsidies that resulted in a significant and increasing government subsidy debt to renewable investors as well as a high curtailment rate for renewable electricity. This article reviews China’s renewable electricity development and policies between 2006 and 2020. First, we examine how China’s fixed feed-in tariff subsidies for wind and solar power generation under its planned electricity system distorted investment incentives and led to both the high subsidy debt and the high rates of curtailment. Then we discuss how and why the government shifted its renewable subsidy policy from fixed feed-in tariffs to auctions. We conclude with a discussion of additional policy reforms to support the continued development of renewable electricity in China.

Optimal Design on Fossil-to-Renewable Energy Transition of Regional Integrated Energy Systems under CO2 Emission Abatement Control: A Case Study in Dalian, China

Optimal design of regional integrated energy systems (RIES) offers great potential for better managing energy sources, lower costs and reducing environmental impact. To capture the transition process from fossil fuel to renewable energy, a flexible RIES, including the traditional energy system (TES) based on the coal and biomass based distributed energy system (BDES), was designed to meet a regional multiple energy demand. In this paper, we analyze multiple scenarios based on a new rural community in Dalian (China) to capture the relationship among the energy supply cost, increased share of biomass, system configuration transformation, and renewable subsidy according to regional CO2 emission abatement control targets. A mixed integer linear programming (MILP) model was developed to find the optimal solutions. The results indicated that a 40.58% increase in the share of biomass in the RIES was the most cost-effective way as compared to the separate TES and BDES. Based on the RIES with minimal cost, by setting a CO2 emission reduction control within 40%, the RIES could ensure a competitive total annual cost as compared to the TES. In addition, when the reduction control exceeds 40%, a subsidy of 53.83 to 261.26 RMB/t of biomass would be needed to cover the extra cost to further increase the share of biomass resource and decrease the CO2 emission.

Game theory-based renewable multi-energy system design and subsidy strategy optimization

Renewable multi-energy systems have become a promising solution for deep decarbonization. However, government subsidy is needed to incentivize the deployment of renewable technologies for emission reduction. Here, we provide a game theory-based modeling framework along with tailored solution strategy for optimizing multi-energy system design and renewable subsidy strategies. We apply our modeling framework to four pilot towns in China for studying how government and consumers interact with each other to achieve their respective goals with minimum costs. We show that government subsidy policies can effectively promote renewable penetration or reduce carbon emissions, and photovoltaic panels and wind turbines absorb most of government subsidy in renewable penetration and emission cap cases, respectively. We also analyze in detail the optimal energy technology operations for meeting targets of government and pilot towns. We find that only increasing renewable penetration cannot achieve deep decarbonization; however, directly imposing carbon emission cap causes heavy government financial burden. Hence, we recommend an economic two-phase decarbonization pathway, namely first increasing renewable penetration to reduce dependence on fossil energy and then imposing a carbon emission cap to fulfill deep decarbonization. Our two-phase decarbonization pathway can be applied to other cities in China and worldwide, aiming to promote renewable energy penetration, reduce reliance on fossil fuels, and finally realize carbon neutral cities. Our proposed game theory-based modeling framework can also be extended to various temporal and spatial scales for studying how different entities can cooperate together for deep decarbonization.

The entry and exit game in the electricity markets: A mean-field game approach

<p style='text-indent:20px;'>We develop a model for the industry dynamics in the electricity market, based on mean-field games of optimal stopping. In our model, there are two types of agents: the renewable producers and the conventional producers. The renewable producers choose the optimal moment to build new renewable plants, and the conventional producers choose the optimal moment to exit the market. The agents interact through the market price, determined by matching the aggregate supply of the two types of producers with an exogenous demand function. Using a relaxed formulation of optimal stopping mean-field games, we prove the existence of a Nash equilibrium and the uniqueness of the equilibrium price process. An empirical example, inspired by the UK electricity market is presented. The example shows that while renewable subsidies clearly lead to higher renewable penetration, this may entail a cost to the consumer in terms of higher peakload prices. In order to avoid rising prices, the renewable subsidies must be combined with mechanisms ensuring that sufficient conventional capacity remains in place to meet the energy demand during peak periods.</p>