Abstract
Having discussed technical requirements, potentials and costs for balancing technologies in the previous sections, this chapter investigates problems in a market economy with electricity supply that changes with weather conditions and incentives to balance supply and demand (see Sect. 7.1). This is followed by an analysis of the reasons and potentials for politically manipulating economic framework conditions (see Sect. 7.2). The results are finally summarised and concluded in Sect. 7.3.
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Notes
- 1.
These sentences and in general all others should be read as ceteris paribus formulations. This means that other aspects are held constant for the sake of the argument. In particular, the structure of the system may change and then other effects could appear as well. Still another aspect is that shifts in demand may lead to movements up or down the average cost curve. Such effects cannot be discussed though without introductions to very specific properties of technologies.
- 2.
Stadler (2008) discusses technologies that can be used for this mechanism.
- 3.
Problems regarding norms, standards, law and the economic integration of virtual power stations in the whole energy system are discussed at length in Droste-Franke et al. (2009).
- 4.
See the model and evidence for Scandinavian countries in Försund and Hjalmarsson (2010).
- 5.
Efficient nodal pricing allows in principle for regional price differences whenever local bottlenecks lead to relatively high supply or demand. In the German system, law currently imposes uniform prices, because they are held to be desirable. However, they also have the disadvantage that incentives to remove bottlenecks are suppressed because average prices are inefficient signals. The ideal solution to this dilemma is to achieve uniform prices through efficient investment, rather than administrative measures. Försund and Hjalmarsson (2010) suggest increases in transmission capacity as an efficient response to excess supply in four Swedish price areas. As volatility can be very strong, for example, in West Denmark consumers and other buyers may want to have some limitations to price fluctuations. Allowing for regional price differences within a small corridor, in combination with an obligation to remove bottlenecks within a certain time scale could be a good compromise that protects consumers without suppressing signals and leaving some incentives for investment.
- 6.
An extensive discussion can be found in Ziesemer (2008).
- 7.
The conceptually corresponding signals of disequilibria during recessions are downward deviations of inventories in goods markets and upward deviations from equilibrium unemployment.
- 8.
China has announced the intention to enforce environmental policy through the (non) allocation of credit.
- 9.
Currently, firms producing emissions must have as many certificates as they have emissions on April 30 every year.
- 10.
The Future Investment Program (ZIP) of the German Ministry of Environment supported R&D in 2001–2003 for CSP.
- 11.
CIF (2010) does not mention Desertec, but it seems to fit in perfectly.
- 12.
In the USA, investment in CSP is supported by tax credits (Handelsblatt).
- 13.
For funding of electricity grids see Koenig et al. (2004).
- 14.
The WTO limits the allowance for subsidies to 20% of the respective investment. If investment in the energy sector, I e , is, for example, 5% of all investment, I, and investment is 20% of GDP we get sI e /GDP = sI e (I/GDP)/I = 0.2 × 0.05 × 0.2 = 0.002. This means that subsidies are one fifth or a percent of GDP. If this is carried equally by all sectors it does not seem very much. However, the corresponding tax burden imposed on the polluter alone may be very high and may cause high adjustment costs and losses in international competitiveness.
- 15.
Other interesting examples for abandoning are cases of national sovereignty, where it is not possible to impose the polluter pays principle. In the dolphin/tuna case and the turtle/shrimp case, US subsidies paid for environmentally benign fishing technologies, which avoided catching dolphins and turtles.
- 16.
The question here is how to reduce: at equal percentage rates, or equal amounts of money of, which percentage rates, how many steps, percentage rates of the initial values of the remaining tariffs or subsidies, etc.
- 17.
See FiFo et al. (2009); for example, tax credits in sea transport are characterised as adequate whereas those for agriculture and forest sectors are characterised as too high.
- 18.
Of course, recent criticism regarding the implementation of startup subsidies should be taken into account. However, they should be based on a sound integration of subsidies into the empirical work (see Santarelli and Vivarelli 2002). Moreover, as the justification is mostly related to externalities and capital market imperfection, good indicators for these should be used as well (see Kösters 2009).
- 19.
Gas-fired power stations may also provide this benefit, but it is beyond the scope of this project to judge subsidies for gas.
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Droste-Franke, B. et al. (2012). Economic Analysis and Policy. In: Balancing Renewable Electricity. Ethics of Science and Technology Assessment, vol 40. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-25157-3_7
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