Harnessing Renewable Energy in Electric Power Systems

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Reflecting its reliance on fossil fuels, the electric power industry produces the majority of the world's greenhouse gas emissions. The need for a revolution in the industry becomes further apparent given that 'decarbonization' means an increasing electrification of other sectors of the economy in particular, through a switch from gasoline to electric vehicles.


<p>This book is both timely and important. It is also highly educational. It can help us better understand the opportunities and challenges renewable energy creates and learn from the experience of others. In this way, we will all, whether in politics, business, education, or at home, be better equipped to make, with confidence, the vital decisions that will lead to the energy system we seek for the futurea system that is at once secure, sustainable, and economically robust.From the Foreword by GNTHER OETTINGER, European Union Energy Commissioner</p> <p>E D I T E D</p> <p>BY</p> <p>HARNESSING RENEWABLE ENERGY</p> <p>in Electric Power Systems Theory, Practice, Policy</p> <p>Boaz Moselle Jorge Padilla Richard Schmalensee</p> <p>A comprehensive and timely review of the international experience in fostering the use of renewable energy sources in the electricity industry. Understanding the political, business, and technological drivers behind the clean energy revolution is important as many nations aim to enable low-carbon development paths that will bring economic prosperity to their citizens, while at the same time reducing human impacts on the environment.BLAS PREZ HENRQUEZ, executive director, Center for Environmental Public Policy at the Goldman School of Public Policy, University of California, Berkeley</p> <p>This book should be devoured by thoughtful policymakers considering how renewables will fit into decarbonized electric systems. Bringing varied perspectives on this fundamental question, these scholars make a provocative and informative contribution to a topic of critical importance to governments around the world.SUE TIERNEY, managing principal, Analysis Group, Inc., USA</p> <p>HARNESSING RENEWABLE ENERGYin Electric Power Systems</p> <p>Reflecting its reliance on fossil fuels, the electric power industry produces the majority of the world's greenhouse gas emissions. The need for a revolution in the industry becomes further apparent given that "decarbonization" means an increasing electrification of other sectors of the economyin particular, through a switch from gasoline to electric vehicles. Of the options for producing electric power without significant greenhouse gas emissions, renewable energy is most attractive to policymakers, as it promises increased national self-reliance on energy supplies and the creation of new industries and jobs, without the safety and political concerns of nuclear power or the unproven technology of carbon capture and storage. Drawing on both economic theory and the experiences of the United States and EU member states, Harnessing Renewable Energy in Electric Power Systems addresses the key questions surrounding renewable energy policies. How appropriate is the focus on renewable power as a primary tool for reducing greenhouse gas emissions? If renewable energy is given specific support, what form should that support take? What are the implications for power markets if renewable generation is widely adopted? Thorough and well evidenced, this book will be of interest to a broad range of policymakers, the electric power industry, and economists who study energy and environmental issues. BOAZ MOSELLE is a director and J ORGE PADILLA a managing director at LECG, an international consulting group focusing on economic and financial analyses to provide objective opinions and advice regarding complex disputes and inform legislative, judicial, regulatory, and business decision makers. R ICHARD SCHMALENSEE is dean emeritus and professor of economics and management at MIT's Sloan School of Management, and director of the MIT Center for Energy and Environmental Policy Research.Energy / Economics / Climate</p> <p>Boaz Moselle Jorge Padilla Richard Schmalensee</p> <p>Cover image: Solar Panel Luis Pedrosa/istockphoto.com</p> <p>www.rffpress.orgRFF Press strives to minimize its impact on the environment</p> <p>HARNESSING RENEWABLE ENERGYin Electric Power Systems</p> <p>HARNESSING RENEWABLE ENERGYin Electric Power SystemsTheory, Practice, PolicyEdited by</p> <p>Boaz Moselle, Jorge Padilla and Richard Schmalensee</p> <p>Washington, DC</p> <p> London</p> <p>First published in 2010 by RFF Press, an imprint of Earthscan Copyright Earthscan 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except as expressly permitted by law, without the prior, written permission of the publisher. Earthscan LLC,1616 P Street, NW, Washington, DC 20036, USA Earthscan Ltd, Dunstan House, 14a St Cross Street, London EC1N 8XA, UK Earthscan publishes in association with the International Institute for Environment and Development For more information on RFF Press and Earthscan publications, see www.rffpress.org and www.earthscan.co.uk or write to earthinfo@earthscan.co.uk ISBN: 978-1-933115-90-0 Copyedited by Joyce Bond Typeset by KerryPress Ltd Cover design by Circle Graphics Library of Congress Cataloging-in-Publication Data Harnessing renewable energy in electric power systems : theory, practice, policy/edited by Boaz Moselle, Jorge Padilla, and Richard Schmalensee. p. cm. Includes bibliographical references and index. ISBN 978-1-933115-90-0 (hardback : alk. paper) 1. Electric power production. 2. Electric power productionEnvironmental aspects. 3. Electric power productionEconomic aspects. 4. Renewable energy sources. I. Moselle, Boaz. II. Padilla, Jorge 1983 III. Schmalensee, Richard. TK1001.H37 2010 333.7932--dc22 2010017827 A catalogue record for this book is available from the British Library At Earthscan we strive to minimize our environmental impacts and carbon footprint through reducing waste, recycling and offsetting our CO2 emissions, including those created through publication of this book. For more details of our environmental policy, see www.earthscan.co.uk. Printed and bound in the UK by MPG Books The paper used is FSC certified</p> <p>The findings, interpretations, and conclusions offered in this publication are those of the authors. They do not necessarily represent the views of Resources for the Future, its directors, or its officers.</p> <p>About Resources for the Future and RFF PressResources for the Future (RFF) improves environmental and natural resource policymaking worldwide through independent social science research of the highest caliber. Founded in 1952, RFF pioneered the application of economics as a tool for developing more effective policy about the use and conservation of natural resources. Its scholars continue to employ social science methods to analyze critical issues concerning pollution control, energy policy, land and water use, hazardous waste, climate change, biodiversity, and the environmental challenges of developing countries. RFF Press supports the mission of RFF by publishing book-length works that present a broad range of approaches to the study of natural resources and the environment. Its authors and editors include RFF staff, researchers from the larger academic and policy communities, and journalists. Audiences for publications by RFF Press include all of the participants in the policymaking processscholars, the media, advocacy groups, NGOs, professionals in business and government, and the public. RFF Press is an imprint of Earthscan, a global publisher of books and journals about the environment and sustainable development.</p> <p>Resources for the FutureDirectorsVicky A. Bailey Trudy Ann Cameron Preston Chiaro W. Bowman Cutter John M. Deutch Mohamed T. El-Ashry Daniel C. Esty Linda J. Fisher Kathryn S. Fuller David G. Hawkins Deborah Hechinger Peter R. Kagan Rubn Kraiem Frank E. Loy Michael A. Mantell Peter J. Robertson Richard Schmalensee Robert N. Stavins Joseph Stiglitz Mark R. Tercek</p> <p>OfficersLawrence H. Linden, Chair Steven W. Percy, Vice Chair Philip R. Sharp, President Edward F. Hand, Vice PresidentFinance and Administration Laurel L. Harvey, Vice PresidentDevelopment and Corporate Secretary Mark A. Cohen, Vice PresidentResearch</p> <p>Editorial Advisors for RFF PressWalter A. Rosenbaum, University of Florida Jeffrey K. Stine, Smithsonian Institution</p> <p>Contents</p> <p>About the Contributors List of Figures and Tables Acknowledgments Acronyms and Abbreviations Foreword Gnther Oettinger Chapter 1. Toward a Low-Carbon Future in Electricity? Boaz Moselle, Jorge Padilla, and Richard Schmalensee Part I. Technology Chapter 2. Renewable Energy Technologies for Electricity Generation Godfrey Boyle Part II. Renewables, Climate Change, and Energy Policy Chapter 3. Renewables Forecasts in a Low-Carbon World: A Brief Overview Erin T. Mansur Chapter 4. Renewable Generation and Security of Supply Boaz Moselle Chapter 5. Market Failure and the Structure of Externalities Kenneth Gillingham and James Sweeney Chapter 6. Renewable Energy, Energy Efficiency, and Emissions Trading Jos Goldemberg</p> <p>ix xiii xix xxi xxvii 1 5 7 31 33 51 69 93</p> <p>viii</p> <p>Harnessing Renewable Energy in Electric Power Systems</p> <p>Part III. Renewable Generation and Electric Power Markets Chapter 7. Electricity Wholesale Market Design in a Low-Carbon Future William W. Hogan Chapter 8. Energy Regulation in a Low-Carbon World Richard Green Chapter 9. Building Blocks: Investment in Renewable and Nonrenewable Technologies James Bushnell Chapter 10. Developing a Supergrid Christian von Hirschhausen Part IV. National Experiences Chapter 11. Renewable Electricity Generation in the United States Richard Schmalensee Chapter 12. The European Unions Policy on the Development of Renewable Energy Christopher Jones Chapter 13. UK Renewable Energy Policy since Privatization Michael G. Pollitt Chapter 14. Experience with Renewable Energy Policy in Germany Hannes Weigt and Florian Leuthold Chapter 15. Renewable Electricity Support: The Spanish Experience Luis Agosti and Jorge Padilla Conclusions: Whither Renewable Generation? Boaz Moselle, Jorge Padilla, and Richard Schmalenesee Index</p> <p>111 113 137 159 181 207 209 233 253 283 309 327 335</p> <p>About the Contributors</p> <p>Luis Agosti is a senior consultant at LECG, an economic and financial consulting firm, where he provides research and analysis in the field of applied microeconomics, including the economics of competition, regulation, and finance. He also belongs to the Energy Practice. During his years in consultancy, he has specialized in the electricity and gas sectors. His work has been focused in the analysis of regulation in the electricity and natural gas sectors, with special emphasis in the design of the wholesale power market in Spain. Godfrey Boyle is a professor of renewable energy and director of the Energy and Environment Research Unit in the Faculty of Mathematics, Computing, and Technology at the UK Open University. He is also a visiting professor at The Energy and Resources Institute University in New Delhi. He is coauthor and editor of Renewable Energy: Power for a Sustainable Future (2004) and Renewable Electricity and the Grid (Earthscan 2009). James Bushnell is an associate professor and the Cargill Chair in Energy Economics in the Department of Economics at Iowa State University, the director of the universitys Biobased Industry Center, and a research associate of the National Bureau of Economic Research. He has served as a member of the Market Monitoring Committee of the California Power Exchange and is currently a member of the Market Surveillance Committee of the California Independent System Operator. He has testified on regulatory and competition policy issues before numerous state and federal regulatory and legislative institutions and consulted on energy issues throughout the United States and internationally. He has written extensively on the regulation, organization, and competitiveness of energy markets. Kenneth Gillingham is an environmental and energy economist who worked for several years in Washington, DC, at the White House Council of Economic Advisers, Resources for the Future, and the Joint Global Change Research Institute. Following this, he was a Fulbright Fellow at the University of Auckland in New Zealand and is currently at Stanford University. He has published journal articles on topics such as solar energy policy, biofuels policy, energy efficiency, and transportation policy. Jos Goldemberg, a physicist, is a professor emeritus of the University of So Paulo, Brazil, of which he was the rector between 1986 and 1990. He has served as president of the Energy Company of the State of So Paulo and Brazils secretary of state for science and technology. He chaired the World Energy</p> <p>x</p> <p>Harnessing Renewable Energy in Electric Power Systems</p> <p>Assessment of the United Nations Development Programme. Time magazine honored him as one of its Heroes of the Environment, and the Asahi Glass Foundation of Japan awarded him its 2008 Blue Planet Prize. Richard Green is the director of the Institute for Energy Research and Policy and a professor of energy economics in the Department of Economics at the University of Birmingham. He has held visiting positions at the Office of Electricity Regulation, University of California Energy Institute, and Massachusetts Institute of Technology. He is also an author or coauthor of numerous articles published in such journals as the Journal of Political Economy, Journal of Industrial Economics, Oxford Economic Papers, and Fiscal Studies. Christian von Hirschhausen is a full professor of economic and infrastructure policy at Berlin University of Technology and a research professor at DIW Berlin. Before that, he held the chair of energy economics and public sector management at Dresden University of Technology. He is the scientific director of several programs that cover a wide range of research in energy and related fields. His recent research on contracts and institutions in the utilities was published in The Energy Journal. Additional research focuses on the European economy, energy policy, and economic policy in transitional countries. William W. Hogan is the Raymond Plank Professor of Global Energy Policy at the John F. Kennedy School of Government, Harvard University, and the research director of the Harvard Electricity Policy Group, which is examining alternative strategies for a more competitive electricity market. He has been a member of the faculty of Stanford University, where he founded the Energy Modeling Forum, and is a past president of the International Association for Energy Economics. His current research focuses on major energy industry restructuring, network pricing and access issues, market design, and energy policy in nations worldwide. Christopher Jones was the director of New and Renewable Sources of Energy, Energy Efficiency and Innovation at the Directorate-General for Energy and Transport, European Commission, until January 15, 2010, when he became the head of the cabinet of Commissioner Andris Piebalgs, responsible for EU development policy. He is also a visiting professor of law at the College of Europe in Bruges...</p>


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