This paper examines the effect of the UK’s unilateral policy to implement a carbon price floor in Great Britain for fossil-fuel based electricity generation on the adjoining electricity market in Ireland. We find that, subject to efficient use of interconnectors between the two markets and constant imports from France and the Netherlands, a carbon price…
Modelling Net Zero and Sector Coupling: Lessons for European Policy Makers
This paper seeks to discuss some of the policy implications which arise from the modelling of Net Zero GHG emissions in 2050 within a sector coupling approach. We draw on a major study of the EU-UK energy system in 2050 produced by the Centre for Regulation in Europe (Chyong et al. 2021), which involved stakeholders…
Performance Incentives in Capacity Mechanisms: Conceptual Considerations and Empirical Evidence
Performance incentives are elements of capacity mechanism design aimed at prompting committed agents to manage their resources in such a way that they eventually meet their obligations when the system is tight. These incentives can be introduced in practice by means of two different (but non-conflicting) approaches in capacity mechanisms. First, performance incentives can be…
Editorial
Influence of Climate Policy and Market Forces on Coal-fired Power Plants: Evidence on the Dutch market over 2006-2014
Many governments aim to reduce the dependence on coal-fired generation to decrease carbon emissions. At the same time power markets with competition between independently operating power firms have been created which leave the actual decisions concerning electricity production to these firms. This paper analyzes the interaction between climate policies and policies to foster power markets….
Balancing between competition and coordination in smart grids – a Common Information Platform (CIP)
The commercial value added in electricity distribution networks and smart grids is increasing. Concerns about competition on a level-playing field are raised. The debate on vertical network unbundling is reaching the distribution networks. Primary driver for this discussion is the requirement to exchange information in smart grids in a neutral and non-discriminatory way. Against the…
Security of Supply, the Role of Interconnectors and Option Values : insights from the GB Capacity Auction
The UK Government has carefully designed a Capacity Mechanism to deliver reliable electricity. This paper criticises the determination of the amount to procure, and argues that the amount set for the first auction was excessive, particularly (but not exclusively) in ignoring the contribution from interconnectors. Too little attention was given to either the political economy…
Irish and British electricity prices: what recent history implies for future prices
This paper compares retail and wholesale electricity prices in SEM, the market of the island of Ireland, and BETTA in Great Britain. Estimated wholesale costs are much lower in BETTA. We show that this is mostly because the wholesale price in BETTA is set too low to cover generation costs, although it is compensated by…
Taxing Energy Use in the OECD
This article compares effective tax rates, in energy and carbon terms, on the full spectrum of energy use across the OECD, highlighting notable differences in the taxation of energy in OECD countries. The analysis strongly suggests that current taxes are not well geared towards attaining environmental, budgetary and distributional policy objectives. Incoherencies from an environmental…
An Extended Analysis on the Remuneration of Capacity under Scarcity Conditions
This paper extends a recent analysis which investigated the impact of scarcity adders produced by operating reserve demand curves on the financial viability of generation units in the Belgian market. Our paper is inspired by practical considerations related to the implementation of the mechanism in European electricity markets. We are specifically interested in: (i) the…