Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market

G. Gurkan, R. Langestraat

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In the UK electricity market, generators are obliged to produce part of their electricity with renewable energy resources in accordance with the Renewable Obligation Order. Since 2009 technology banding has been added, meaning that different technologies are rewarded with a different number of certificates. We analyze these two different renewable obligation policies in a mathematical representation of an electricity market with random availabilities of renewable generation outputs and random electricity demand. We also present another, alternative, banding policy. We provide revenue adequate pricing schemes for the three obligation policies. We carry out a simulation study via sampling. A key finding is that the UK banding policy cannot guarantee that the original obligation target is met, hence potentially resulting in more pollution. Our alternative provides a way to make sure that the target is met while supporting less established technologies, but it comes with a significantly higher consumer price. Furthermore, as an undesirable side effect, we observe that a cost reduction in a technology with a high banding (namely offshore wind) leads to more CO2 emissions under the UK banding policy and to higher consumer prices under the alternative banding policy.
Original languageEnglish
Pages (from-to)85-95
JournalEnergy Policy
Volume70
Early online date13 Apr 2014
DOIs
Publication statusPublished - Jul 2014

Fingerprint

electricity
market
modeling
energy
Electricity
Renewable energy resources
Cost reduction
Pollution
renewable resource
Availability
Sampling
energy resource
analysis
policy
Power markets
Costs
pollution
sampling
simulation
price

Keywords

  • renewable energy obligations
  • green certificates
  • mathematical programming
  • UK electricity market

Cite this

@article{7a7a58bf838e45429cd206b9bdc30bb9,
title = "Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market",
abstract = "In the UK electricity market, generators are obliged to produce part of their electricity with renewable energy resources in accordance with the Renewable Obligation Order. Since 2009 technology banding has been added, meaning that different technologies are rewarded with a different number of certificates. We analyze these two different renewable obligation policies in a mathematical representation of an electricity market with random availabilities of renewable generation outputs and random electricity demand. We also present another, alternative, banding policy. We provide revenue adequate pricing schemes for the three obligation policies. We carry out a simulation study via sampling. A key finding is that the UK banding policy cannot guarantee that the original obligation target is met, hence potentially resulting in more pollution. Our alternative provides a way to make sure that the target is met while supporting less established technologies, but it comes with a significantly higher consumer price. Furthermore, as an undesirable side effect, we observe that a cost reduction in a technology with a high banding (namely offshore wind) leads to more CO2 emissions under the UK banding policy and to higher consumer prices under the alternative banding policy.",
keywords = "renewable energy obligations, green certificates, mathematical programming, UK electricity market",
author = "G. Gurkan and R. Langestraat",
year = "2014",
month = "7",
doi = "10.1016/j.enpol.2014.03.022",
language = "English",
volume = "70",
pages = "85--95",
journal = "Energy Policy",
issn = "0301-4215",
publisher = "ELSEVIER SCI LTD",

}

Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market. / Gurkan, G.; Langestraat, R.

In: Energy Policy, Vol. 70, 07.2014, p. 85-95.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Modeling and analysis of renewable energy obligations and technology bandings in the UK electricity market

AU - Gurkan, G.

AU - Langestraat, R.

PY - 2014/7

Y1 - 2014/7

N2 - In the UK electricity market, generators are obliged to produce part of their electricity with renewable energy resources in accordance with the Renewable Obligation Order. Since 2009 technology banding has been added, meaning that different technologies are rewarded with a different number of certificates. We analyze these two different renewable obligation policies in a mathematical representation of an electricity market with random availabilities of renewable generation outputs and random electricity demand. We also present another, alternative, banding policy. We provide revenue adequate pricing schemes for the three obligation policies. We carry out a simulation study via sampling. A key finding is that the UK banding policy cannot guarantee that the original obligation target is met, hence potentially resulting in more pollution. Our alternative provides a way to make sure that the target is met while supporting less established technologies, but it comes with a significantly higher consumer price. Furthermore, as an undesirable side effect, we observe that a cost reduction in a technology with a high banding (namely offshore wind) leads to more CO2 emissions under the UK banding policy and to higher consumer prices under the alternative banding policy.

AB - In the UK electricity market, generators are obliged to produce part of their electricity with renewable energy resources in accordance with the Renewable Obligation Order. Since 2009 technology banding has been added, meaning that different technologies are rewarded with a different number of certificates. We analyze these two different renewable obligation policies in a mathematical representation of an electricity market with random availabilities of renewable generation outputs and random electricity demand. We also present another, alternative, banding policy. We provide revenue adequate pricing schemes for the three obligation policies. We carry out a simulation study via sampling. A key finding is that the UK banding policy cannot guarantee that the original obligation target is met, hence potentially resulting in more pollution. Our alternative provides a way to make sure that the target is met while supporting less established technologies, but it comes with a significantly higher consumer price. Furthermore, as an undesirable side effect, we observe that a cost reduction in a technology with a high banding (namely offshore wind) leads to more CO2 emissions under the UK banding policy and to higher consumer prices under the alternative banding policy.

KW - renewable energy obligations

KW - green certificates

KW - mathematical programming

KW - UK electricity market

U2 - 10.1016/j.enpol.2014.03.022

DO - 10.1016/j.enpol.2014.03.022

M3 - Article

VL - 70

SP - 85

EP - 95

JO - Energy Policy

JF - Energy Policy

SN - 0301-4215

ER -