Working paper

Electricity Production with Intermittent Sources

Stefan Ambec, and Claude Crampes

Abstract

The paper analyzes the interaction between a reliable source of electricity production and intermittent sources such as wind or solar power. We first characterize the first-best dispatch and investment in the two types of energy. We put the accent on the availability of the intermittent source as a major parameter of optimal capacity investment. We then analyze decentralization through competitive market mechanisms. We show that decentralizing first best requires to price electricity contingently on wind or solar availability. By contrast, traditional meters impose a second-best uniform pricing, which distorts the optimal mix of energy sources. Decentralizing the either cross-subsidy from the intermittent source to the reliable source of energy or structural integration of the two types of technology.

JEL codes

  • D24: Production • Cost • Capital • Capital, Total Factor, and Multifactor Productivity • Capacity
  • D61: Allocative Efficiency • Cost–Benefit Analysis
  • Q27: Issues in International Trade
  • Q32: Exhaustible Resources and Economic Development
  • Q42: Alternative Energy Sources

Replaced by

Stefan Ambec, and Claude Crampes, Electricity provision with intermittent sources of energy, Resource and Energy Economics, vol. 34, n. 3, September 2012, pp. 319–336.

Reference

Stefan Ambec, and Claude Crampes, Electricity Production with Intermittent Sources, TSE Working Paper, n. 10-152, March 24, 2010.

See also

Published in

TSE Working Paper, n. 10-152, March 24, 2010