TY - JOUR

T1 - Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions, and Firms

AU - Traber, Thure

AU - Kemfert, Claudia

N1 - Published in Volume 30, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

PY - 2009

Y1 - 2009

N2 - Most models that are used to analyze support policies for renewable electricity neglect important market features like oligopolistic behavior, emission trading, and restricted cross-border transmission capacities. We use a quantitative electricity market model that accounts for these aspects and decompose the impact of the German Feed-in tariff (FIT) into two frequently counteracting effects: a substitution effect and a permit price effect. We find that the total effect of the policy increases the German consumer price slightly by three percent, while the producer price decreases by eight percent. In addition, emissions from electricity generation in Germany are reduced by eleven percent but are hardly altered on the European scale. Finally, it turns out that price-cost margins of almost all firms are increased by the FIT, while nonetheless, the profits of firms are significantly lowered unless the firms combine relatively carbon-intensive production with a weak connection to the German grid.

AB - Most models that are used to analyze support policies for renewable electricity neglect important market features like oligopolistic behavior, emission trading, and restricted cross-border transmission capacities. We use a quantitative electricity market model that accounts for these aspects and decompose the impact of the German Feed-in tariff (FIT) into two frequently counteracting effects: a substitution effect and a permit price effect. We find that the total effect of the policy increases the German consumer price slightly by three percent, while the producer price decreases by eight percent. In addition, emissions from electricity generation in Germany are reduced by eleven percent but are hardly altered on the European scale. Finally, it turns out that price-cost margins of almost all firms are increased by the FIT, while nonetheless, the profits of firms are significantly lowered unless the firms combine relatively carbon-intensive production with a weak connection to the German grid.

KW - Economics

KW - renewable energies

KW - electricity prices

KW - Feed-in-tarif

KW - Germany

KW - ETS

U2 - 10.5547/ISSN0195-6574-EJ-Vol30-No3-8

DO - 10.5547/ISSN0195-6574-EJ-Vol30-No3-8

M3 - Journal articles

VL - 30

SP - 155

EP - 178

JO - The Energy Journal

JF - The Energy Journal

SN - 0195-6574

IS - 3

ER -