Optimal Contracts for Renewable Electricity

DC FieldValueLanguage
dc.contributor.authorParlane, Sarah-
dc.contributor.authorRyan, L. (Lisa B.)-
dc.date.accessioned2019-09-26T11:26:32Z-
dc.date.available2019-09-26T11:26:32Z-
dc.date.copyright2019 the Authorsen_US
dc.date.issued2019-09-
dc.identifier.other201920-
dc.identifier.urihttp://hdl.handle.net/10197/11087-
dc.description.abstractCompanies are increasingly choosing to procure their power from renewable energy sources, with their own set of potential challenges. In this paper we focus on contracts to procure electricity from renewable sources that are inherently unreliable (such as wind and solar). We determine the contracts that minimize the cost of procuring a given amount of renewable energy from two risk-averse generators. We contrast outcomes arising when investments are set in centralised and decentralised settings, with the absence of reliability addressed by either issuing orders in excess of what is needed or by investing in improved reliability. Our results suggest that future contracts may be geared towards a greater reliance on order inflation and lower investments in reliability as the cost of renewable energy keeps falling. The implications of these results for grid congestion and electricity spot market prices should be of interest to regulators and transmission system operators.en_US
dc.language.isoenen_US
dc.publisherUniversity College Dublin. School of Economicsen_US
dc.relation.ispartofseriesUCD Centre for Economic Research Working Paper Seriesen_US
dc.relation.ispartofseriesWP2019/20en_US
dc.subjectRenewable electricity contractsen_US
dc.subjectPower purchase agreementsen_US
dc.subjectNewsvendor modelen_US
dc.subjectRisk aversionen_US
dc.subjectOrder inflationen_US
dc.subjectMoral hazarden_US
dc.subject.classificationD81en_US
dc.subject.classificationD86en_US
dc.subject.classificationL14en_US
dc.subject.classificationL24en_US
dc.subject.classificationL94en_US
dc.subject.classificationQ21en_US
dc.titleOptimal Contracts for Renewable Electricityen_US
dc.typeWorking Paperen_US
dc.statusNot peer revieweden_US
dc.identifier.startpage1en_US
dc.identifier.endpage36en_US
dc.neeo.contributorParlane|Sarah|aut|-
dc.neeo.contributorRyan|L. (Lisa B.)|aut|-
item.fulltextWith Fulltext-
item.grantfulltextopen-
Appears in Collections:Energy Institute Research Collection
Economics Working Papers & Policy Papers
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