Optimal Spatial Pricing and its Impact on Renewable Generation in Great Britain
12:30 - 14:00
This project investigates the importance of implementing adequate locational signals and their possible effects on generation technologies and the performance and regulation of the electricity system, with particular reference to renewable energy in the British electricity market. The economic theory for calculating optimal spatial or locational prices for electricity has been known for over twenty years. However, such theory has never been adopted in the design of any European electricity market. Furthermore it has been suggested that there may be a conflict between the implementation of adequate locational signals and the development of renewable energy because the former may lead to higher network charges which may compromise the profitability (and therefore the feasibility) of renewable energy plants. Thus this project investigates how different forms of spatial pricing may affect renewable technologies, with regards to both their investment and operating decisions, and what regulatory or other policy implications this might imply. In particular the focus is on the British case, where it is alleged that the introduction of more efficient spatial pricing might compromise the development of generation technologies located in particular areas, especially on-shore wind farms in the north of the country. Such research contributes to an important area of current policy debate, given the strong targets for growth in renewable as part of climate change policy and growing concern about energy security.
This seminar has been jointly organized by FEEM and IEFE, Bocconi University.