Jan Abrell

The Interaction of Emissions Trading and Renewable Energy Promotion

Given the ambitious goal of the European Union to achieve CO2 emission reduction, support to renewable energies, and increased energy efficiency a portfolio of different policies is going to be implemented or is already in place in the member states. These instruments have at least partly overlapping objectives; thus, a high degree of interaction is to be expected. In this paper we analyze how the EU ETS and renewable support mechanisms influence one another. We apply a static open economy computable general equilibrium (CGE) model of Germany incorporating different conventional and renewable generation technologies. We find that in case of an ETS with a green certificate trading scheme or a feed-in system the price for carbon drops to zero due to the high share of CO2-neutral renewable generation. Furthermore, the welfare reducing effect of an additional renewable support mechanism is rather low for both schemes.

Start Me Up Modeling of Power Plant Start-Up Conditions and Their Impact on Prices

In this paper we compare different approaches to account for start-up costs when modeling electricity markets. We restrict the model formulation to either linear or mixed integer problems in order to guarantee a robust solution. The results indicate that the choice of the model has a significant impact on the resulting market prices and company profit. The models either calculate higher peak prices or prices below marginal costs in off-peak periods but not both. Furthermore, the models perform differently when we apply a large sample, the number of equations having an important impact. We conclude that different model formulations respond particularly to specific modeling questions.

Transportation and Emission Trading - A CGE Analysis for the EU 15

Transportation, the second largest contributor of CO2 emissions, is not part of the European Emission Trading System. Since transportation is subject to national environmental instruments, this causes differences in marginal abatement costs, and hence, results in economic inefficiencies. We analyze the welfare effects of including transportation in the European emission trading system in a static multi-region CGE model of the EU 15. Our results show that the inclusion road transportation provides a high welfare gains for Europe. Including aviation leads to smaller welfare gain. Concerning water transportation, our analysis indicates the importance of carbon regulation of maritime shipping for international trade.

Integrating Intermittent Renewable Wind Generation - Insights from the Stochastic Electricity Market Model (stELMOD)

In northern Europe wind energy became a dominating renewable energy source due to natural conditions and national support schemes. However, the uncertainty about wind generation affects existing network infrastructure and power production planning of generators and cannot not be fully diminished by wind forecasts. In this paper we develop a stochastic electricity market model to address the impact of uncertain wind generation on electricity markets and commitment decisions of generators. Stochastic programming techniques are used to incorporate uncertain wind generation. The technical characteristics of transporting electrical energy as well as power plants are explicitly taken into account. The consecutive clearing of the electricity markets is incorporated by a rolling planning procedure. The model is applied to the German electricity system covering an exemplary week. Three different cases of considering uncertain wind generation are analyzed. The results indicate that while the bidding behavior in the dayahead market is quite similar the approaches show notable differences in the behavior on the intraday market.

Combining Energy Networks: The Impact of Europe's Natural Gas Network on Electricity Markets Until 2050

The interdependence of electricity and natural gas is becoming a major energy policy and regulatory issue in all jurisdictions around the world. The increased role of gas fired plants in renewable-based electricity markets and the dependence on gas imports make this issue particular striking for the European energy market. In this paper we provide a comprehensive combined analysis of electricity and natural gas infrastructure with an applied focus. We analyze different scenarios of the long-term European decarbonization pathways sketched out by the Energy Roadmap 2050, and identify criteria related to electricity and/or natural gas infrastructure and the interrelation between both markets.

Private Transport and the European Emission Trading System: Revenue Recycling, Public Transport Subsidies, and Congestion Effects

From 2012 onwards, the European Emission Trading System regulates the carbon emissions of electricity generation, refineries, energy intensive production, and aviation. Beside the fuel efficiency regulation of cars, there exists no European approach of carbon regulation in the private transport sectors. However, half of the income of allowance auctioning has to be used for implementing environmental improving policies including public transport subsidies. Using a Computable General Equilibrium model of the German economy, we show that exempting transport from carbon pricing but recycling revenues via public transport subsidies is welfare enhancing. By including congestion effects into the model we show that such a recycling scheme has the potential of negative gross cost of carbon regulation by reducing congestion and global pollution externalities.

Modeling the Diffusion of Carbon Capture and Storage Under Carbon Emission Control and Learning Effects

This paper examines the interrelationship of learning effects and emission control on the diffusion of carbon capture and storage (CCS). We introduce a dynamic model in which an electricity producer maximizes profits subject to emissions control. All technologies are characterized by specific linear marginal costs and CO2 emissions which need to be covered by limited emission permits. The fossil fuel-based plants can be replaced by the CCS technology which is associated with higher capital costs and a lower system efficiency. Both parameters improve due to learning effects if the technology is applied. The model is formulated as a non-linear optimization problem, and solved using GAMS. Given the assumed technological data, the results for a data set of Germany show that CCS is essential to reach carbon emission goals. However, particularly in the case of learning, CCS can help renewable technologies to become competitive.

Heterogeneity of intermittent energy sources anc cost-effective renewable policies

This paper analyzes how cost-effective policies for promoting renewable electricity from wind and solar should be designed in light of their heterogeneous environmental values, i.e. avoided carbon dioxide (CO2) emissions. Employing a numerical partial equilibrium analysis, we find that the gains from differentiating the support mechanism between wind and solar can be considerable and depend on (i) the temporal correlation structure between resource availability and demand and (ii) the non-renewable technology mix.

Higher Price, Lower Costs? Minimum Prices in the EU Emissions Trading Scheme

This paper examines the efficiency and distributional impacts of introducing a price floor in an emissions trading system (ETS) when environmental regulation is partitioned. We theoretically characterize the conditions under which a price floor enhances welfare. Using a multi-country multi-sector numerical general equilibrium model of the European carbon market, we find that moderate minimum price levels in the EU ETS can reduce the costs of EU climate policy by up to thirty percent and yield outcomes close to uniform carbon pricing. Moreover, most of the EU Member States would gain. Our results are robust with respect to parametric uncertainty in production and consumption technologies.

Pathways for the European natural gas market

Natural gas is regarded as a crucial cornerstone of the European energy policy and for the transition towards a sustainable low-carbon energy system. However, the recent conflict between Russia and Ukraine has spurred concerns about the security of gas supplies in growingly import-dependent European markets. Using a numerical model of the European natural gas market, we evaluate the impact of four different network extension scenarios on the European market, namely the Turkish Stream, the Nord Stream 2, the Southern Gas Corridor and an increased LNG capacity. We further assess their effects on the short-term resilience of the network in case of supply interruption.