A sustainable electricity market
Strong growth is taking place in the production of renewable energy. Changes made now to the electricity market can ensure that the transition to a sustainable energy society continues in a responsible manner.
It is theoretically possible to manage a variable renewable energy supply using dynamic rates. In practice, however, consumers are unlikely to pay such close attention to price fluctuations. Furthermore, people are only prepared to pay more for electricity in one hour than in another hour under certain conditions. The researchers found that, if there is already a sizeable capacity in renewable energy, it is possible to combine various measures – such as the emissions trading system, subsidy systems and energy taxes – without them interfering with one another.
A new European electricity market
European electricity markets are undergoing significant changes due to the rapid increase in supply from alternative sources such as wind turbines and solar panels. Although the idea behind this is to make our energy supply more sustainable, it can have a negative impact on the reliability and affordability of the power supply, and therefore on society’s acceptance of renewable energy.
The researchers examined the electricity market from technical, economic and ethical perspectives and found that:
- The influence of a variable renewable energy supply on the stability of the electricity network can, in theory, be managed using dynamic network rates linked to the network load. To assess this, the researchers built a model of the electricity grids that allows the influence of more renewable energy on network stability to be simulated.
- In practice, dynamic network rates have little effect due to the low price sensitivity of consumers.
- People only find dynamic tariffs justified if they are known in advance and if the income obtained from the higher tariffs is used to solve network capacity problems. If these conditions are not met, there will be little support for dynamic tariffs.
- The more technology-specific incentive systems are, the lower the cost-effectiveness. To reduce the costs of incentive systems, therefore, it is recommended that they are designed to be as generic as possible.
- The emissions trading system can be combined with subsidy systems and energy taxes and these systems do not necessarily need to conflict with one another, particularly if there is already a substantial capacity in renewable energy. To assess this, the researchers built an economic model of the electricity market that can be used to address a range of policy questions, including the extent to which various climate policy measures interact with one another in the electricity sector.
The research results will be used as input to the energy debate in both the Dutch and the European contexts through the various stakeholders active in the energy sector (producers, consumers, network operators, agencies).
The growth in renewable energy has consequences in various areas:
- economic (e.g. on the efficiency of the electricity supply and investment incentives);
- technical (e.g. on network reliability);
- societal/ethical (e.g. differences in prices, access charges or energy taxes between regions or different user groups and the justification of this).
electricity market, sustainable energy, reliability, dynamic network tariffs, dynamic network tariffs, price sensitivity, justice, emissions trading, energy industry, energy grants, economic modelOfficial project title: