Electricity shortage in Nigeria is very critical hence, need arises for joint, adequate and timely intervention especially by incorporating the available alternative energy sources. This paper is aimed at designing a Grid-Connected Hybrid Renewable Energy System for the case of Zaria, Nigeria. This was done by considering different scenarios starting from the conventional standalone diesel and gasoline generator systems to renewable off-grid hybrid system and finally to the proposed grid-connected renewable hybrid system design coupled with energy efficiency measures. The considered scenarios were addressed for a defined number of households and the clear benefits have been seen on implementing the proposed target as a transition from the conventional energy systems arising from grid unreliability and power shortages in the study region. In all the scenarios, physical components modelling, simulations and optimization were done using HOMER Pro Software, and finally the energy management aspect to the proposed grid-connected energy system scenario was addressed using ADVANCED EXCEL via a VISUAL BASIC Conditional Programming. The results obtained showed that the proposed scenario i.e. the grid-connected system design was the best of all the scenarios considered in terms of total NPC, LCOE, ghg emissions and pollutants. It ensures for example a total NPC and LCOE reduction from the off-grid hybrid renewable system scenario by 69%. Incorporating the energy efficiency measures to the proposed grid-connected scenario results in improved benefits hence an opportunity for a more rapid transition. Therefore, the proposed approach is the best to implement coupled with expansions for effective solution to energy deficit and climate change challenges in the country of study and the African continent at large.
{"title":"Decentralized Grid-Connected Hybrid Renewable Energy System Design in Nigeria, Case Study of Zaria Municipal","authors":"Ismail Abubakar Jumare, R. Bhandari, A. Zerga","doi":"10.2139/ssrn.3224175","DOIUrl":"https://doi.org/10.2139/ssrn.3224175","url":null,"abstract":"Electricity shortage in Nigeria is very critical hence, need arises for joint, adequate and timely intervention especially by incorporating the available alternative energy sources. This paper is aimed at designing a Grid-Connected Hybrid Renewable Energy System for the case of Zaria, Nigeria. This was done by considering different scenarios starting from the conventional standalone diesel and gasoline generator systems to renewable off-grid hybrid system and finally to the proposed grid-connected renewable hybrid system design coupled with energy efficiency measures. The considered scenarios were addressed for a defined number of households and the clear benefits have been seen on implementing the proposed target as a transition from the conventional energy systems arising from grid unreliability and power shortages in the study region. In all the scenarios, physical components modelling, simulations and optimization were done using HOMER Pro Software, and finally the energy management aspect to the proposed grid-connected energy system scenario was addressed using ADVANCED EXCEL via a VISUAL BASIC Conditional Programming. The results obtained showed that the proposed scenario i.e. the grid-connected system design was the best of all the scenarios considered in terms of total NPC, LCOE, ghg emissions and pollutants. It ensures for example a total NPC and LCOE reduction from the off-grid hybrid renewable system scenario by 69%. Incorporating the energy efficiency measures to the proposed grid-connected scenario results in improved benefits hence an opportunity for a more rapid transition. Therefore, the proposed approach is the best to implement coupled with expansions for effective solution to energy deficit and climate change challenges in the country of study and the African continent at large.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121013459","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Veronika Grimm, Alexander Martin, C. Sölch, Martin Weibelzahl, Gregor Zöttl
In this paper we analyze a uniform price electricity spot market that is followed by redispatch in the case of network congestion. We assume that the transmission system operator is incentivized to minimize redispatch cost and compare a cost-based redispatch to a market-based redispatch mechanism. For networks with at least three nodes we show that in contrast to cost-based redispatch, in the case of market-based redispatch the cost-minimizing allocation may not be short-run efficient. As we demonstrate, the possibility of the transmission system operator to reduce market-based redispatch cost at the expense of a reduced welfare may be driven by the electricity supply side or the electricity demand side. Based on these results, we propose a new hybrid approach where the transmission system operator implements the efficient (instead of the cost minimizing) dispatch and uses market-based redispatch compensations.
{"title":"Market-Based Redispatch May Result in Inefficient Dispatch","authors":"Veronika Grimm, Alexander Martin, C. Sölch, Martin Weibelzahl, Gregor Zöttl","doi":"10.2139/ssrn.3120403","DOIUrl":"https://doi.org/10.2139/ssrn.3120403","url":null,"abstract":"In this paper we analyze a uniform price electricity spot market that is followed by redispatch in the case of network congestion. We assume that the transmission system operator is incentivized to minimize redispatch cost and compare a cost-based redispatch to a market-based redispatch mechanism. For networks with at least three nodes we show that in contrast to cost-based redispatch, in the case of market-based redispatch the cost-minimizing allocation may not be short-run efficient. As we demonstrate, the possibility of the transmission system operator to reduce market-based redispatch cost at the expense of a reduced welfare may be driven by the electricity supply side or the electricity demand side. Based on these results, we propose a new hybrid approach where the transmission system operator implements the efficient (instead of the cost minimizing) dispatch and uses market-based redispatch compensations.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123642729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ottawa should clear up confusion about its plans for clean fuel standards, according to a new report by the C.D. Howe Institute. In “Speed Bump Ahead: Ottawa Should Drive Slowly on Clean Fuel Standards” author Benjamin Dachis argues federal policymakers must examine the inherent limitations and potential economic costs of a clean fuel standard system.
{"title":"Speed Bump Ahead: Ottawa Should Drive Slowly on Clean Fuel Standards","authors":"Benjamin Dachis","doi":"10.2139/ssrn.3218640","DOIUrl":"https://doi.org/10.2139/ssrn.3218640","url":null,"abstract":"Ottawa should clear up confusion about its plans for clean fuel standards, according to a new report by the C.D. Howe Institute. In “Speed Bump Ahead: Ottawa Should Drive Slowly on Clean Fuel Standards” author Benjamin Dachis argues federal policymakers must examine the inherent limitations and potential economic costs of a clean fuel standard system.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"114 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121162301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The growing energy demand and means to fulfill it has contributed a lot to ever-increasing carbon emission in the atmosphere.The energy sector in India is facing constant challenges to produce clean energy,and with growing energy demand, this sector has already faced a lot of stress to deal with current situation. To mitigate this challenge all the sectors which are using energy needs to optimize their energy use and to find renewables means to generate energy to fulfill their needs. The building industry is accountable for 40 percent of the total energy consumption and thus needs to improve their energy use through energy efficiency measures and renewable energy use. Energy efficiency in educational buildings is rarely addressed when talked about buildings in general, although, educational buildings can act as a living laboratory for energy efficient building design and can act as role model for surrounding community for transferring knowledge. The library building is one of the most important buildings in the educational campuses,and the most happening place presents a challenge for achieving energy efficiency due to its variable occupancy rates during operational hours. Case study approach is used for this paper for finding out the renewable energy (solar photovoltaic) generational potential of the library building located on the educational campus. For this study, PVsyst software was used for simulating the library building for finding the possibility of implementing solar photovoltaic panels and thus making building self-sufficient on the guidelines of net-zero energy building. Some variable that affects the sizing of the photovoltaic panel for the buildings were taken up includes the area of the roof, shading factors, inverter size, etc. It was found that the with proper integration of solar photovoltaic system and reducing the energy use can be useful in making library building low carbon buildings and with improvement in technology in the field of solar PV systems it may be possible to make library buildings net-zero energy buildings in the near future.
{"title":"Developing a Net Zero Energy Building: A Case Study of an Institutional Library","authors":"Sunil Sharma, Ashwani Kumar, Nand Kumar, Sobhagyawati Gupta","doi":"10.2139/ssrn.3198651","DOIUrl":"https://doi.org/10.2139/ssrn.3198651","url":null,"abstract":"The growing energy demand and means to fulfill it has contributed a lot to ever-increasing carbon emission in the atmosphere.The energy sector in India is facing constant challenges to produce clean energy,and with growing energy demand, this sector has already faced a lot of stress to deal with current situation. To mitigate this challenge all the sectors which are using energy needs to optimize their energy use and to find renewables means to generate energy to fulfill their needs. The building industry is accountable for 40 percent of the total energy consumption and thus needs to improve their energy use through energy efficiency measures and renewable energy use. Energy efficiency in educational buildings is rarely addressed when talked about buildings in general, although, educational buildings can act as a living laboratory for energy efficient building design and can act as role model for surrounding community for transferring knowledge. The library building is one of the most important buildings in the educational campuses,and the most happening place presents a challenge for achieving energy efficiency due to its variable occupancy rates during operational hours. Case study approach is used for this paper for finding out the renewable energy (solar photovoltaic) generational potential of the library building located on the educational campus. For this study, PVsyst software was used for simulating the library building for finding the possibility of implementing solar photovoltaic panels and thus making building self-sufficient on the guidelines of net-zero energy building. Some variable that affects the sizing of the photovoltaic panel for the buildings were taken up includes the area of the roof, shading factors, inverter size, etc. It was found that the with proper integration of solar photovoltaic system and reducing the energy use can be useful in making library building low carbon buildings and with improvement in technology in the field of solar PV systems it may be possible to make library buildings net-zero energy buildings in the near future.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"232 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114423730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
F. Lamperti, G. Dosi, M. Napoletano, A. Roventini, Alessandro Sapio
In this work, we employ an agent-based integrated assessment model to study the likelihood of transition to green, sustainable growth in presence of climate damages. The model comprises heterogeneous fossil-fuel and renewable plants, capital- and consumption-good firms and a climate box linking greenhouse gasses emission to temperature dynamics and microeconomic climate shocks affecting labour productivity and energy demand of firms. Simulation results show that the economy possesses two statistical equilibria: a carbon-intensive lock-in and a sustainable growth path characterized by better macroeconomic performances. Once climate damages are accounted for, the likelihood of a green transition depends on the damage function employed. In particular, aggregate and quadratic damage functions overlook the impact of climate change on the transition to sustainability; to the contrary, more realistic micro-level damages are found to deeply influence the chances of a transition. Finally, we run a series of policy experiments on carbon (fossil fuel) taxes and green subsidies. We find that the effectiveness of such market-based instruments depends on the different channels climate change affects the economy through, and complementary policies might be required to avoid carbon-intensive lock-ins.
{"title":"And Then He Wasn’t a She: Climate Change and Green Transitions in an Agent-Based Integrated Assessment Model","authors":"F. Lamperti, G. Dosi, M. Napoletano, A. Roventini, Alessandro Sapio","doi":"10.2139/ssrn.3219924","DOIUrl":"https://doi.org/10.2139/ssrn.3219924","url":null,"abstract":"In this work, we employ an agent-based integrated assessment model to study the likelihood of transition to green, sustainable growth in presence of climate damages. The model comprises heterogeneous fossil-fuel and renewable plants, capital- and consumption-good firms and a climate box linking greenhouse gasses emission to temperature dynamics and microeconomic climate shocks affecting labour productivity and energy demand of firms. Simulation results show that the economy possesses two statistical equilibria: a carbon-intensive lock-in and a sustainable growth path characterized by better macroeconomic performances. Once climate damages are accounted for, the likelihood of a green transition depends on the damage function employed. In particular, aggregate and quadratic damage functions overlook the impact of climate change on the transition to sustainability; to the contrary, more realistic micro-level damages are found to deeply influence the chances of a transition. Finally, we run a series of policy experiments on carbon (fossil fuel) taxes and green subsidies. We find that the effectiveness of such market-based instruments depends on the different channels climate change affects the economy through, and complementary policies might be required to avoid carbon-intensive lock-ins.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"106 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115677005","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates volatility forecasting for crude oil and natural gas. The main objective of our research is to determine whether the heterogeneous autoregressive (HAR) model of Corsi (2009) can be outperformed by harnessing information from a related energy commodity. We find that on average, information from related commodity does not improve volatility forecasts, whether we consider a multivariate model, or various univariate models that include this information. However, superior volatility forecasts are produced by combining forecasts from various models. As a result, information from the related commodity can be still useful, because it allows us to construct wider range of possible models, and averaging across various models improves forecasts. Therefore, for somebody interested in precise volatility forecasts of crude oil or natural gas, we recommend to focus on model averaging instead of just including information from related commodity in a single forecast model.
{"title":"Exploiting Dependence: Day-Ahead Volatility Forecasting for Crude Oil and Natural Gas Exchange-Traded Funds","authors":"Š. Lyócsa, Péter Molnár","doi":"10.2139/ssrn.3177361","DOIUrl":"https://doi.org/10.2139/ssrn.3177361","url":null,"abstract":"This paper investigates volatility forecasting for crude oil and natural gas. The main objective of our research is to determine whether the heterogeneous autoregressive (HAR) model of Corsi (2009) can be outperformed by harnessing information from a related energy commodity. We find that on average, information from related commodity does not improve volatility forecasts, whether we consider a multivariate model, or various univariate models that include this information. However, superior volatility forecasts are produced by combining forecasts from various models. As a result, information from the related commodity can be still useful, because it allows us to construct wider range of possible models, and averaging across various models improves forecasts. Therefore, for somebody interested in precise volatility forecasts of crude oil or natural gas, we recommend to focus on model averaging instead of just including information from related commodity in a single forecast model.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129659487","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-04DOI: 10.1007/978-981-10-7919-1_6
Zhong-qi Deng, Rui-zhi Pang, Yu Fan
{"title":"Allocation Schemes and Efficiencies of China's Carbon and Sulfur Emissions","authors":"Zhong-qi Deng, Rui-zhi Pang, Yu Fan","doi":"10.1007/978-981-10-7919-1_6","DOIUrl":"https://doi.org/10.1007/978-981-10-7919-1_6","url":null,"abstract":"","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124017066","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Carbon credit projects generate carbon credits by abating greenhouse gas emissions. Carbon credits can then be traded on carbon markets or immobilized in order to compensate for caused emissions. The Clean Development Mechanism (CDM) and Verified Carbon Standard (VCS), as the two most important carbon credit mechanisms, are investigated and compared regarding the success of projects. We define success as the fulfilling of the ex-ante emission abatement estimation and apply regression analyses to explain its variation on a project level by technology, location, scale, duration and participation. The results are discussed in detail on technology level for wind power, energy efficiency, hydro power as well as biomass projects and are compared with regard to CDM and VCS. Our main results indicate that large scale projects often compensate for their under-performance due to economies of time. Furthermore, the duration of projects, their location and structure of participants have significant influence on the success of the projects. The sign of the coefficients of explanatory variables are broadly in line with intuition and related literature, although, due to data availability, they are not always highly significant statistically.
{"title":"An Empirical Comparison of Carbon Credit Projects Under the Clean Development Mechanism and Verified Carbon Standard","authors":"Andrea von Avenarius, D. Settygowda, R. Kiesel","doi":"10.2139/ssrn.3168672","DOIUrl":"https://doi.org/10.2139/ssrn.3168672","url":null,"abstract":"Carbon credit projects generate carbon credits by abating greenhouse gas emissions. Carbon credits can then be traded on carbon markets or immobilized in order to compensate for caused emissions. The Clean Development Mechanism (CDM) and Verified Carbon Standard (VCS), as the two most important carbon credit mechanisms, are investigated and compared regarding the success of projects. We define success as the fulfilling of the ex-ante emission abatement estimation and apply regression analyses to explain its variation on a project level by technology, location, scale, duration and participation. The results are discussed in detail on technology level for wind power, energy efficiency, hydro power as well as biomass projects and are compared with regard to CDM and VCS. Our main results indicate that large scale projects often compensate for their under-performance due to economies of time. Furthermore, the duration of projects, their location and structure of participants have significant influence on the success of the projects. The sign of the coefficients of explanatory variables are broadly in line with intuition and related literature, although, due to data availability, they are not always highly significant statistically.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133230841","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Peak oil demand has become the hot new topic for oil market analysts but as always, runs the risk of being subject to superficial analysis, just as peak oil supply was. The primary arguments come from climate change activists who believe fossil fuel consumption must drop sharply and from technological optimists who believe that electric vehicles are on the verge of dominating auto sales, depressing oil demand. Others argue that biofuels might become more competitive with petroleum, or that slower economic growth and falling birth rates will cause demand to peak.
{"title":"Possible Determinants of Peak Oil Demand","authors":"M. Lynch","doi":"10.2139/ssrn.3156989","DOIUrl":"https://doi.org/10.2139/ssrn.3156989","url":null,"abstract":"Peak oil demand has become the hot new topic for oil market analysts but as always, runs the risk of being subject to superficial analysis, just as peak oil supply was. The primary arguments come from climate change activists who believe fossil fuel consumption must drop sharply and from technological optimists who believe that electric vehicles are on the verge of dominating auto sales, depressing oil demand. Others argue that biofuels might become more competitive with petroleum, or that slower economic growth and falling birth rates will cause demand to peak.","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"165 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133805852","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-03-28DOI: 10.11575/sppp.v11i0.43169
David P. Brown
Alberta’s electricity market is currently undergoing a period of substantial transition. The province should proceed with caution as it switches from an energy-only electricity market to a capacity market by 2021. Many other jurisdictions have already made the changeover and Alberta can learn from their experiences in order to avoid common mistakes and pitfalls that can arise with the deployment of a capacity market. There were growing concerns that the existing electricity market structure would not attract sufficient investment from conventional generation (e.g., natural gas) due to the increased penetration of zero marginal cost renewable generation. As a result, the Alberta government has chosen to transition to a capacity market. For consumers, a capacity market aims to ensure there is sufficient investment in new generation capacity to “keep the lights on” and reduce price swings in the wholesale market. The capacity market will also help the province meet its goals for attracting investors and transitioning away from its dependence on coal-fired electricity generation. However, a switchover is not as simple as it sounds. In an energy-only market, firms are paid solely based on the provision of electricity in hourly wholesale markets. In capacity markets, electricity-generating firms are also paid for providing generation capacity, reflecting the potential to provide electricity at some point in the future. While capacity markets can help ensure there is a reliable supply of electricity, there are several challenges in the implementation of capacity markets. This paper discusses the motivation for the adoption of capacity markets, highlights challenges regulators face when implementing this market design in the context of Alberta, and summarizes the key trade-offs associated with energy-only versus capacity market designs. Relative to an energy-only market, a capacity market is more complex and requires that regulators specify numerous parameters that are essential to the functioning of the market. An essential, but often controversial component is the formulation of the capacity demand curve. A capacity demand curve for Alberta has to be carefully designed to deal with uncertainties in demand growth, given that Alberta’s electricity demand is closely interconnected with the ups and downs of global crude oil prices. Consideration must be given to the perspective of outside investors who – as in any area of economic interest – are wary about uncertainty. Political and regulatory uncertainty can undermine the success of a capacity market. This potential for investor hesitancy could result in incumbent firms, familiar with investing in Alberta, seizing a larger share of the market in an already historically concentrated environment. It is critical that policymakers establish a clear and well-defined trajectory for the future of Alberta’s electricity market design as a whole, not just its capacity market. The capacity market is not a panacea fo
{"title":"Capacity Market Design: Motivation and Challenges in Alberta's Electricity Market","authors":"David P. Brown","doi":"10.11575/sppp.v11i0.43169","DOIUrl":"https://doi.org/10.11575/sppp.v11i0.43169","url":null,"abstract":"Alberta’s electricity market is currently undergoing a period of substantial transition. The province should proceed with caution as it switches from an energy-only electricity market to a capacity market by 2021. Many other jurisdictions have already made the changeover and Alberta can learn from their experiences in order to avoid common mistakes and pitfalls that can arise with the deployment of a capacity market. There were growing concerns that the existing electricity market structure would not attract sufficient investment from conventional generation (e.g., natural gas) due to the increased penetration of zero marginal cost renewable generation. As a result, the Alberta government has chosen to transition to a capacity market. For consumers, a capacity market aims to ensure there is sufficient investment in new generation capacity to “keep the lights on” and reduce price swings in the wholesale market. The capacity market will also help the province meet its goals for attracting investors and transitioning away from its dependence on coal-fired electricity generation. However, a switchover is not as simple as it sounds. In an energy-only market, firms are paid solely based on the provision of electricity in hourly wholesale markets. In capacity markets, electricity-generating firms are also paid for providing generation capacity, reflecting the potential to provide electricity at some point in the future. While capacity markets can help ensure there is a reliable supply of electricity, there are several challenges in the implementation of capacity markets. This paper discusses the motivation for the adoption of capacity markets, highlights challenges regulators face when implementing this market design in the context of Alberta, and summarizes the key trade-offs associated with energy-only versus capacity market designs. Relative to an energy-only market, a capacity market is more complex and requires that regulators specify numerous parameters that are essential to the functioning of the market. An essential, but often controversial component is the formulation of the capacity demand curve. A capacity demand curve for Alberta has to be carefully designed to deal with uncertainties in demand growth, given that Alberta’s electricity demand is closely interconnected with the ups and downs of global crude oil prices. Consideration must be given to the perspective of outside investors who – as in any area of economic interest – are wary about uncertainty. Political and regulatory uncertainty can undermine the success of a capacity market. This potential for investor hesitancy could result in incumbent firms, familiar with investing in Alberta, seizing a larger share of the market in an already historically concentrated environment. It is critical that policymakers establish a clear and well-defined trajectory for the future of Alberta’s electricity market design as a whole, not just its capacity market. The capacity market is not a panacea fo","PeriodicalId":234456,"journal":{"name":"Politics & Energy eJournal","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124959901","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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