PhD student of chemical engineering, University of Waterloo
investigating effect and cost-efficiency of incentives on viability of renewable energy projects
I investigate the efficiency and effect of renewable energy incentives and also implementing hydrogen storage systems in a microgrid on the development of renewable energy infrastructure. Different countries have implemented incentives in order to promote development of renewable energies. These incentives, however, not only have different effects on the development of different technologies but also have confounded effects on the whole system. As a result, investigating the efficiency and cost-effectiveness of these incentives seems to be vital. The question of this research is how to define, combine and use incentives in the most profitable manner to face the new challenges in the development of renewable energy. In this context, hydrogen energy is chosen as an energy carrier to be investigated based on incentives implemented. The importance of research on hydrogen energy is not only its application as an emission-free fuel, but also application of hydrogen production in the context of a microgrid an essential step for developing Power-to-Gas systems as an attractive energy storage option for seasonal storage applications where energy is produced at times of low demand and saved for use during high demand days.
Abstract: The development of renewable and sustainable energy is advanced by public financial support. This is particularly so in the German Energiewende, which seeks to replace nuclear and fossil electricity generation with wind, sun, and biomass. We study the impact of the (changes in the) feed‐in tariff (FIT) policy on the investment in wind electricity generation capacity in Germany in the period 2000–2014. We estimate a generic investment model that includes this support mechanism, the cost of capital, investment risks such as wind and price volatility, and manufacturing costs. We discuss specific features for different types of wind energy investors, such as the incumbents, small private investors, diversified companies, and independent power producers. We find that a change in the FIT has a negative impact on investment capacity regarding the generation of wind energy: A one monetary unit increase in the variation of the tariff is to be associated with a decrease by 0.17 megawatts of wind capacity installed. We argue that it is policy uncertainty that makes investors shy away from making real investments. We also argue that the drivers for wind energy investment can differ along different types of firms. For the traditional power producers, especially electricity price volatility, construction costs, and carbon prices seem to matter. But for the other investor types, the FIT is crucial indeed.
Pub.: 10 Jun '16, Pinned: 19 Jul '17
Abstract: Renewable energy is growing worldwide in terms of generation capacity and investment inflows. However, barriers to the transition to renewable energy remain in many countries. This article analyses the barriers to renewable energy in South Africa in the context of global growth, which in 2014, saw South Africa in the top 10 of investments into renewable energy. Regulation through law has potential to address many of the barriers to renewable energy, but investors should understand the nature and extent of these barriers to guide future investment decisions into renewable energy. Law is one of the social, regulatory, and economic instruments that can be used to control and shape development. However, in South Africa the energy and environmental law and policy have not sufficiently addressed the obstacles to renewable energy technologies. Cheap fossil fuel energy led to short-term economic growth, which, in the long term, is not environmentally sustainable. While a lot has been done to enable renewable energy, challenges remain that may make it difficult for investors and foreign corporations to enter the South African renewable energy market. This article concludes that, while the context (socio-economic and political) of obstacles to renewable energy is relevant, legal and policy barriers are overriding and should be the focus of effort in order to create an enabling regulatory environment.
Pub.: 29 Mar '16, Pinned: 19 Jul '17
Abstract: South Africa's Renewable Energy Independent Power Producer Procurement Program has run four competitive tenders/auctions since 2011, which have seen US$19 billion in private investment, and electricity prices of wind power falling by 46% and solar PV electricity prices by 71%, in nominal terms. Competitive tenders were introduced after an unsuccessful attempt to implement feed‐in tariffs. The tenders incorporated standard, nonnegotiable contract documents, including 20‐year Power Purchase Agreements and an Implementation Agreement whereby the Government of South Africa back‐stops IPP payments by the national utility, Eskom. All of these projects have reached financial close to date and some are already delivering power to the grid. The financing success has been due in part to the requirements for commercial banks to undertake a thorough due diligence of projects prior to bids being offered. The details of the policy package described may be useful for other policy makers in countries developing policies for renewable energy deployment.
Pub.: 20 Apr '16, Pinned: 19 Jul '17
Abstract: This paper examines the impacts of uncertainties in U.S. renewable energy policy on the investment decisions of renewable electricity producers. We develop and solve a dynamic optimization model to understand how investment in wind energy depends on market and policy uncertainties. These uncertainties include the federal government’s uncertain decision about the continuation of the Production Tax Credit (PTC) policy and the stochasticity of prices in the market for Renewable Electricity Credits (RECs). Our results show that investors require higher REC prices to invest without the PTC policy. Results contribute to our understanding of how policy uncertainty affects the profitability threshold required for investors to commit to renewable energy projects.
Pub.: 19 Apr '16, Pinned: 19 Jul '17
Abstract: Renewable Portfolio Standards (RPS) are U.S. state mandates that utilities produce some of their electricity using renewable energy sources in an effort to reduce greenhouse gas emissions. While advocates highlight the potential long‐term benefits of RPS, critics argue that RPS will increase electricity prices due to the higher costs of renewable energy generation. However, to date, there are no published empirical studies of the effect of RPS on electricity prices. Using state‐level panel data from 1990 to 2011 and the difference‐in‐differences method, I find that implementation increases electricity prices when the RPS policy first becomes binding.
Pub.: 22 Jul '15, Pinned: 19 Jul '17
Abstract: Greenhouse gas (GHG) emissions trading, green pricing programs and renewable portfolio standards (RPS) are three concurrent policies implemented in the United States to reduce reliance on fossil fuel and GHG emissions. Despite their differences in policy targets, they are closely related and integrated with competitive electric markets. This paper examines the interactions among these three policies by considering two aspects of the RPS policy design: double-counting and bundling. Whereas the former grants utilities using the same MWh of renewable energy to meet RPS and to sell as green power, the latter allows them to bundle the renewable energy credits/certificates (RECs) with non-renewable electricity and sell as green power. This paper studies the policy designs by formulating each policy combination as a market model, which treats electricity as a differentiated product. We derive the conditions under which the REC price serves as the upper bound of the green premium or vice versa. The theoretical analysis shows that the bundling could be redundant in the presence of double counting. The policies that allow for double-counting appear to be a better choice, since they result in a higher social surplus. Most surplus gains are due to consumers surplus from green power sales. The framework we develop in this paper is capable of incorporating other detailed policy designs in the analysis such as strategic reserve and offset.
Pub.: 22 May '12, Pinned: 19 Jul '17
Abstract: This paper optimizes the electricity and renewable energy credit (REC) purchasing process for energy distribution. Electricity is traded in deregulated time-sequential markets at fluctuating prices. Optimal electricity purchasing under price and demand uncertainty is a challenging task for electricity distributors, and the recently implemented renewable portfolio standards (RPS) further complicate the purchasing process. Government regulatory decisions concerning the RPS require distributors to purchase corresponding certificates, namely RECs, equivalent to a certain percentage of their electricity sales. This paper formulates and optimizes the joint purchasing process for electricity and RECs. It also analyzes the effect of RPS policy on electricity distributors.
Pub.: 16 Jun '12, Pinned: 19 Jul '17
Abstract: Following the dominant firm-competitive fringe model, this paper analyses the response of Japan’s nonrenewable electricity utilities to the renewable portfolio standards (RPS) and feed-in tariff (FIT) scheme. The output of electricity from renewable energy sources (RES-E) is primarily correlated with the magnitude of the RPS requirement and the fixed tariff. Nonrenewable firms suffer a reduction in revenue due to increased RES-E production under both schemes. The RPS requirement has direct impact on the renewable energy certificate (NEC) price. If the incumbent nonrenewable electricity utilities gain market power in both electricity and NEC markets, they can suppress the RPS quota to preserve their vested benefits. In the FIT scheme, the above-market RES-E generation cost is passed on to consumers via a surcharge. Since grid-connected RES-E accelerated rapidly under FIT, nonrenewable electricity utilities would face a substantial increase in costs to maintain network reliability due to the intermittent and variable nature of RES-E technologies. The Japanese government should therefore take measures to ensure variable renewable power occupies a higher share of the electricity system, and to do so in a cost-effective manner.
Pub.: 07 Feb '17, Pinned: 19 Jul '17
Abstract: The capacity of renewable energy sources (RES) has grown rapidly worldwide, and this growth has benefited from such support schemes as renewable portfolio standards (RPS), feed-in tariffs (FITs), and market premia (MP). Previous research concentrated on comparing the effectiveness of these policy instruments at driving RES investment, but the field’s focus has shifted toward evaluating how they structurally affect electricity markets. In particular, research has sought to assess how much RES support schemes contribute to achieving the three main objectives of electricity policy, the affordability, reliability, and sustainability of electricity supply. In this work, we quantitatively compare RPS, FIT, and MP schemes in terms of those criteria by simulating the impact of all three support schemes via a dynamic long-term capacity investment model. We find that each support scheme increases RES penetration and thereby reduces carbon dioxide (CO2) emissions. Whereas MP and FITs can achieve this outcome at lower cost, RPS deliver more robust results.
Pub.: 06 May '16, Pinned: 19 Jul '17
Abstract: Due to local scarcity of fossil fuel reserves, deployment of renewable energy has been on the Japanese government energy policy agenda for decades. While a significant amount of government budget was being allocated to renewables Research and Development, in contrast very little attention was paid to public support for renewable energy deployment. Against this background, in 2003, the Japanese government enacted legislation based on the renewable portfolio standard (RPS) scheme, which requires electricity retailers to supply a certain amount of electricity from renewable sources to grid consumers. The RPS legislation had been expected to ensure market efficiency, as well as bringing a steady increase in renewable capacity. Later, in 2009, the feed-in tariff (FIT) scheme was introduced to let electricity utilities purchase electricity generated from renewable energy sources with regulated prices. This paper aims to use the choice of renewable policy as a case-study to understand barriers for policy transfer and innovation, mainly through comparative studies between RPS and FIT in Japan. The result of this study shows that, in Japan, most policy-makers face the ‘lock-in’ of existing technology, which frustrates the deployment of renewable energy. For this reason, there is reluctance to allow experimentation that could promote a shift to other energy sources. In order to achieve the rapid change towards green industry, innovation policy needs to be implemented through effective and efficient methods, such as a carbon tax for fossil fuels; enlargement of renewable energy deployment to sources such as wind, geothermal and solar; and conducting further studies toward public preference and willingness to pay for the new clean energy sources.
Pub.: 23 Jun '12, Pinned: 19 Jul '17
Abstract: Using data from a survey of households in 11 OECD countries, this paper investigates the determinants of preferences for a completely green residential electricity system. Three important questions are addressed: (i) how much are households willing to pay to use only renewable energy? (ii) does willingness-to-pay (WTP) vary significantly across household groups and countries? and (iii) what drives the decision to enter the (hypothetical) market for green energy and, given entry, what drives the level of WTP? The analysis here differs from previous studies on green energy in two ways: first, data and analyses are comparable across countries and second, a comprehensive attempt is made to understand 0 WTP, and to accommodate—using a censored quantile regression (CQR) framework—unobserved heterogeneity. The survey data indicate a low WTP, at 11–12 % of current electric bill. This study also addresses a key question: how important is income for understanding WTP, relative to more “attitudinal” determinants? The effect of income overall appears ambiguous, with Tobit-like models indicating that income is not significant while the CQR indicates that income exerts a significant effect near the center of the distribution of WTP. Across all frameworks used, a key determinant of WTP appears to be environmental attitudes, particularly membership in an environmental organization.
Pub.: 04 Jan '15, Pinned: 19 Jul '17
Abstract: The maximum principle of optimal control theory is applied to the problem of optimizing the operation of a heat pump, when a storage capability is available and the electrical utility offers time-of-day price incentives in order to help level its diurnal load profile. The cost functional for optimal control is the monetary cost of purchased electrical energy. A bilinear model for the heat pump is assumed. When the ambient temperature is cyclic over the 24-hour period of the price pattern, periodic boundary conditions apply and the closed extremal trajectories are found to be unique and easily determined with a one-dimensional numerical search. These extremals have simple characteristics and reveal plausible strategies for minimizing the cost of purchased energy. They are potentially implementable with a simple, micro-processor-based controller.
Pub.: 01 Jul '88, Pinned: 29 Jun '17
Abstract: The paper aims to assess the main drivers of willingness to pay for renewable electricity of Lithuanian households. The paper deals with assessments of willingness to pay for renewables and reviews the situation of renewable electricity generation and consumption in Lithuania and compare achieved results with studies conducted in other countries. The pilot empirical study for the assessment of Lithuanian households willingness to pay for electricity produced from renewables was conducted. Though the estimates of WTP may be biased by due to the possible non-representativeness of the returned questionnaires and social-economic characteristics of focus group and the effects of information provision can be also overestimated some important findings can be obtained from this study. The results of study indicated that information and environmental awareness play the crucial role in willingness to pay for renewables in Lithuanian households. The study also presented that persons having higher income and higher education are willing to pay more for electricity produced from renewables in Lithuania. These results do not contradict with studies conducted in other countries. Information has positive impact on increase of WTP in other studies as well. The gender and age does not have significant impact on WTP. The assessed WTP of Lithuanian households is significantly lower than subsides for renewable electricity provided in the form of feed-in prices in Lithuania, therefore, the paper recommends to review feed-in tariffs for renewable electricity in Lithuania and to develop a reasonable energy pricing and incentive system.
Pub.: 15 Jul '14, Pinned: 29 Jun '17
Abstract: EPA proposed the CEIP to spur renewable energy and energy efficiency efforts during 2020–21 prior to Clean Power Plan compliance. The CEIP offers tradable allowances for renewable energy generated or energy saved under eligible programs. It is unclear how much additional solar energy will be generated solely from the CEIP given that the solar tax credit extension has caused a flurry of activity.
Pub.: 31 Oct '16, Pinned: 29 Jun '17
Abstract: Photovoltaic (PV) Hybrid power systems are an emerging energy technology that promises to create great opportunities and challenges for developing and developed countries. The current study analyzes the techno-economic feasibility of different PV hybrid power systems using the RETScreen Clean Energy Project Analysis Software for a typical household in Urumqi, China. The solar radiation data of Urumqi is taken from the National Aeronautics and Space Administrative (NASA) database. In Urumqi, the global solar radiation ranges from 1.93 to 5.92 kWh/m2/day, and the annual average scale is predicted to be 4.2 kWh/m2/day. Furthermore, the electrical load consumed by a household in this region is 10.275kWh/day with 5.7kW peak demand. In this paper, the electricity generation, financial viability, greenhouse gas (GHG) emission reductions, and sensitivity analyses are discussed. Three solar tracking models (fixed, one-axis and two-axis) for the off-grid residential PV power systems have been considered. The considered off-grid PV power systems are projected to annually produce approximately 3.68 MWh (fixed tilt arrays), 3.79 MWh (one-axis), and 3.83 MWh (two-axis) of alternating current electricity delivered for a typical household in Urumqi. The PV/diesel/battery power system is the most economic feasible scenario, whereas the diesel power system is the most expensive for a household in Urumqi. In addition, the minimum value of the GHG emission reduction is 5.5 tCO2/year for an off-grid PV system with fixed tilt arrays, while the maximum value of GHG emission reduction is 5.6 tCO2/year for an off-grid PV system with a one-axis or two-axis tracking module. The off-grid PV/battery power system with a one-axis or two-axis tracking module can offer the best performance in terms of GHG reduction. In addition, the NPV and GHG reduction cost values increase with the increases of the fuel cost escalation rate, inflation rate, and project life, whereas the two values decrease with the increase of the discount rate. Therefore, the economic and environmental factors heavily influence the selection of a solar tracking model (fixed, one-axis, or two-axis) for an off-grid PV hybrid power system for a household in Urumqi, China.
Pub.: 11 Mar '16, Pinned: 27 Jun '17
Abstract: Over the last decade, wind energy has emerged as the most important non‐hydro renewables sector, contributing significantly to global efforts on developing low-carbon energy systems. In terms of grid electricity generation, its power output has increased almost 16-fold since 2000 and currently produces around 3 times that of solar photovoltaic, 4 times more than biomass and 20 times more than geothermal installations globally. Europe and East Asia have been at the forefront of wind energy development, together accounting for almost 70 % of total installed capacity and most of the world’s largest wind turbine producers. This paper begins by providing an overview of historic and recent developments in wind energy and then discusses key techno-innovation, production and internationalisation issues before looking at policy approaches taken by European and East Asian countries to renewable energy generally and wind energy more specifically. Finally, obstacles to the future development of the wind energy sector are discussed.
Pub.: 17 Aug '13, Pinned: 27 Jun '17
Abstract: Over the past few months, China has published its development plans for the 13th Five Year Plan [FYP] period [2016–2020] for energy, and separately for the electricity sector, renewable energy, hydro, wind, solar, and biomass energy. Here, we review these policies, as well as a number of key supporting policy documents that aim at increased renewable energy use in China. Presuming that China will not overshoot its growth targets for wind and PV, annual additions over the 13th FYP period will average 16 GW for wind and 13.5 GW for PV, well below the growth levels seen in recent years. The key to success in China's continued transition to renewable energy, however, does not lie in such capacity additions alone. At least as important will be the efforts at improving grid interconnectedness, flexibility of generating capacity and the grid, market mechanisms that will reduce and spread electricity demand, and better enable renewables to compete, and efforts at increasing the level of consumption of the renewable power generated.
Pub.: 26 Jun '17, Pinned: 27 Jun '17
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