B1 Intermediate Other 189 Folder Collection
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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.
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How the current electricity market design may keep fossil fuel alive

189 Folder Collection
Johnson published on July 9, 2017
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