Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market

Gül Gürkan and Romeo Langestraat

Energy Policy, 2014, vol. 70, issue C, 85-95

Abstract: In the UK electricity market, generators are obliged to produce part of their electricity with renewable energy resources in accordance with the Renewable Obligation Order. Since 2009 technology banding has been added, meaning that different technologies are rewarded with a different number of certificates. We analyze these two different renewable obligation policies in a mathematical representation of an electricity market with random availabilities of renewable generation outputs and random electricity demand. We also present another, alternative, banding policy. We provide revenue adequate pricing schemes for the three obligation policies. We carry out a simulation study via sampling. A key finding is that the UK banding policy cannot guarantee that the original obligation target is met, hence potentially resulting in more pollution. Our alternative provides a way to make sure that the target is met while supporting less established technologies, but it comes with a significantly higher consumer price. Furthermore, as an undesirable side effect, we observe that a cost reduction in a technology with a high banding (namely offshore wind) leads to more CO2 emissions under the UK banding policy and to higher consumer prices under the alternative banding policy.

Keywords: Renewable energy obligations; Green certificates; Mathematical programming; UK electricity market (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421514001694
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:70:y:2014:i:c:p:85-95

DOI: 10.1016/j.enpol.2014.03.022

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().