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  • The increase in solar and wind power may also make it more attractive

  • to continue burning fossil fuel for electricity production.

  • That is the surprising outcome of a study by energy researchers

  • at Rotterdam School of Management, Erasmus University.

  • On the way to a sustainable energy future

  • we need renewable energy sources.

  • But a challenge with these sources is

  • that the sun is not always shining and the wind is not always blowing.

  • In the energy world, this called 'the intermittency problem'.

  • We all want to increase sustainable energy, but we have to be careful.

  • Our research has shown that if you don't add them in a careful manner.

  • this can actually advocate the use of fossil fuel energy resources,

  • which we actually do not want.

  • To understand why this happens and to understand the business motivation,

  • you need to understand how energy markets work,

  • and how producers act strategically on these markets.

  • On energy markets, power producers need to make predictions

  • about their power production up to a month ahead.

  • This allows them to make commitments on so-called forward markets.

  • Actually, most energy is sold here.

  • As these contracts allow both producers and retailers

  • to avoid uncertainties.

  • This means that renewable energy sources, for example wind power producers,

  • need to make predictions about how much the wind is blowing

  • and solar power producers need to make predictions about how much the sun is shining.

  • But as the wind is not always blowing and the sun is not always shining,

  • sometimes these renewable power plants

  • fail to keep up with their prediction on the short term.

  • Producers and retailers deal with these shortages and surpluses on the short term

  • on so-called spot markets.

  • Buying and selling electricity on the day itself

  • allows to balance supply and demand almost in real-time.

  • and therefore ensure grid stability.

  • So when intermittent renewable energy sources cannot fulfill their predictions in real-time,

  • conventional power plants need to compensate for this.

  • And of course, they want the market to reward them for that.

  • With the increase of renewable energy,

  • our model shows two effects.

  • First we find the desirable effect.

  • Increasing the share ow low-cost renewable energy sources

  • also drops the forward market price.

  • However, from a certain point onwards

  • increasing the share of renewable energy even further,

  • also makes that there is more uncertainty on the short term.

  • This makes that conventional energy sources, which are flexible,

  • move to the spot market and have higher expected profits there.

  • In practice this means that building more windmills

  • and integrating more solar panels

  • actually also means more incentives for dirty energy sources.

  • This research shows that the key to integration

  • of a rising shire of renewables is flexibility.

  • Flexibility can be achieved in several different ways.

  • One way is storage.

  • But another way, which is very important,

  • is very good market design.

  • And this is what we are working on in this center.

The increase in solar and wind power may also make it more attractive

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B1 energy renewable renewable energy fossil fuel wind power

How the current electricity market design may keep fossil fuel alive

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    Johnson posted on 2017/07/09
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