Now showing 1 - 3 of 3
  • Publication
    Specifying An Efficient Renewable Energy Feed-in Tariff
    (International Association for Energy Economics (IAEE), 2016-07-19) ; ; ;
    Commonly-employed Feed-in Tariff (FiT) structures result in either investors or policymakers incurring all market price risk. This paper derives efficient pricing formulae for FiT designs that divide market price risk amongst investors and policymakers. With increasing deployment and renewable energy policy costs, a means to precisely apportion this risk becomes of greater importance. Option pricing theory is used to calculate efficient FiT prices and expected policy cost when investors are exposed to elements of market price risk. Expected remuneration and policy cost is equal for all FiTs while policymaker and investor exposure to uncertain market prices differs. Partial derivatives characterise sensitivity to unexpected deviations in market conditions. This sensitivity differs by FiT type. The magnitudes of these effects are quantified using numerical examples for a stylised Irish case study. Based on these relationships, we discuss the conditions under which each policy choice may be preferred.
      245Scopus© Citations 15
  • Publication
    An auction framework to integrate dynamic transmission expansion planning and pay-as-bid wind connection auctions
    Competitive renewable energy procurement auctions are becoming increasingly prevalent. In a pay-as-bid auction, investors bid the price support required and receive that price if successful. Bidding strategy may be influenced by factors external to the auction, such as transmission expansion planning decisions. This may increase costs. In this paper, we show that integrating a pay-as-bid auction with transmission expansion planning may allow for closer total system cost minimisation over many time periods. This paper develops an auction mechanism and associated modelling framework to carry this out. The contributions of this framework are verified using a numerical example. Our results show that ignoring generation costs in transmission expansion planning can have economic consequences, while traditional pay-as-bid auctions can benefit from incorporating features associated with transmission expansion planning, such as multi-period optimisation. Full integration of both modelling frameworks can lead to efficiency improvements, both in terms of reduced investor rent-seeking and a more efficient deployment path.
      532Scopus© Citations 12
  • Publication
    Optimising feed-in tariff design through efficient risk allocation
    Many Feed-in Tariff designs exist. This paper provides a framework to determine the optimal design choice through an efficient allocation of market price risk. Feed-in Tariffs (FiTs) incentivise the deployment of renewable energy technologies by subsidising remuneration and transferring market price risk from investors, through policymakers, to a counterparty. This counterparty is often the electricity consumer. Using Stackelberg game theory, we contextualise the application of different FiT policy designs that efficiently divide market price risk between investors and consumers, conditional on risk preferences and market conditions. Explicit consideration of policymaker/consumer risk burden has not been incorporated in FiT analyses to date. We present a simulation-based modelling framework to carry this out. Through an Irish case study, we find that commonly employed flat-rate FiTs are only optimal when policymaker risk aversion is extremely low whilst constant premium policies are only optimal when investor risk aversion is extremely low. When both policymakers and investors are risk averse, an intermediate division of risk is optimal. We provide evidence to suggest that the contextual application of many FiT structures is suboptimal, assuming both investors and policymakers are at least moderately risk averse. Efficient risk allocation in FiT design choice will be of increasing policy importance as renewables deployment grows.
      778Scopus© Citations 16