Dscusson Papes Thue Tabe Clauda Kemfet Impacts of the Geman Suppot fo Renewable Enegy on Electcty Pces, Emssons and Pofts: An Analyss Based on a Euopean Electcty Maket Model Beln, July 2007
Opnons expessed n ths pape ae those of the autho and do not necessaly eflect vews of the nsttute. IMPRESSUM DIW Beln, 2007 DIW Beln Geman Insttute fo Economc Reseach Mohenst. 58 10117 Beln Tel. +49 (30) 897 89-0 Fax +49 (30) 897 89-200 http://www.dw.de ISSN pnt edton 1433-0210 ISSN electonc edton 1619-4535 Avalable fo fee downloadng fom the DIW Beln webste.
Dscusson Papes 712 Thue Tabe* Clauda Kemfet* Impacts of the Geman Suppot fo Renewable Enegy on Electcty Pces, Emssons and Pofts: An Analyss based on a Euopean Electcty Maket Model 1 Beln, July 2007 * DIW Beln, Depatment Enegy, Tanspotaton, Envonment, ttabe@dw.de; ckemfet@dw.de 1 We would lke to thank Tuong Phac Tuong fo calculatons wth the GTAP-E model, Jochen Dekmann fo helpful comments and suggestons, and fo fnancal suppot by the EU poject ADAM (018476).
Dscusson Papes 712 Table of Contents Table of Contents Abstact... 1 1 Intoducton... 1 2 The Model... 3 3 Data and Calbaton... 5 4 Results... 10 5 Conclusons... 14 I
Dscusson Papes 712 Lst of Tables and Fgues Lst of Tables and Fgues Table 1: Technologes of the conventonal powe plants n the model... 6 Table 2: Net capactes [GW] of the ffteen lagest fms n Euope... 7 Table 3: Paametes of the magnal cost and emsson functons of the ffteen lagest fms n Euope... 8 Table 4: Tansmsson capactes [TWh/a] between countes... 9 Table 5: Effects of the feed-n taff on pces, supply and emssons... 10 Table 6: Effects of the Geman feed-n taff on Euopean electcty secto pofts [mllon Euo]... 14 Fgue 1: Effect of the feed-n on the Geman poduce pce... 11 Fgue 2: Effect of the feed-n on Geman electcty secto emssons... 12 II
Dscusson Papes 712 0 Abstact Abstact Effects of enewable suppot legslaton on electcty pces have been analyzed wth a plethoa of models. Howeve, these models neglect at least one of the followng aspects whch we take nto account n ou analyss: olgopolstc maket behavo of domnant fms, emsson tadng, estcted electcty tade and poducton capactes, and effects on poduce pces and fm pofts. In ths pape we use the electcty maket model EMELIE and decompose the mpact of the feed-n of enewable enegy n Gemany nto two effects: a substtuton effect tggeed by the dsplacement of conventonal souces and a pemt pce effect nduced va the ETS. We fnd that the enewable suppot nceases consume pces slghtly by 0.1 Euocent/kWh, whle the poduce pce deceases by 0.4 Euocent/kWh. In addton, emssons fom electcty geneaton n Gemany ae educed by 32 Mt CO 2, but ae hadly alteed f we consde the Euopean electcty secto n total. Fnally, the pofts of most fms ae sgnfcantly educed by the suppot polcy unless the fms combne elatvely cabon ntensve poducton equpment wth a loose connecton to the Geman gd. 1 Intoducton Today, n most of the ndustalzed countes n the wold, enewable enegy s suppoted by polcy schemes n ode to bng ths favoable opton to the maket. Majo advantages attbuted to enewable eneges nclude the low cabon emssons and the sustanablty when compaed wth fossl souces. Futhemoe, enewable enegy can enhance secuty of supply. But, wth the excepton of long establshed lage hydo powe, enewable eneges come at a hgh pce. The hope of the ndustal polcy makes ae that the enewable enegy technologes can beak even once they ae moe developed and the extenal effects of CO 2 emssons ae pced n. Theefoe, n Gemany as n many othe Euopean countes a so called feed-n taff s ganted to electcty fom cetan enewable enegy technologes. Addtonally, the Euopean Emsson Tadng System (ETS) has been ntoduced and ceates a pce fo cabon emssons. Both nstuments act not ndependently of each othe and the mpact of ths polcy mx on the electcty pces ae unde dscusson. Amundsen (2001) nvestgates the nteacton of geen cetfcates, whch mplement a cetan enewable enegy quota by a maket system wth the ETS n a patal equlbum model, deves compaatve statc esults 1
Dscusson Papes 712 1 Intoducton and shows that tade n electcty mattes fo the effects of a tghtenng of the ETS on geen cetfcate pces. Modhost (2001) develops a famewok n whch he analyzes effects of ntenatonally tadable geen cetfcates and nteactons wth an ETS. He fnds that n the absence of an ETS, ntenatonal tade n geen cetfcates wll be based towads domestc capacty expanson f a natonal value s attbuted to the nduced emsson educton. In a smla thee county model, Modhost (2003) analyzes the pomoton of enewable enegy usage by altenatve nstuments and deves esults whch suggest that enewable enegy suppot schemes ae questonable clmate polcy nstuments when an ETS s pesent. He suspects that a coodnated polcy would be moe effcent,.e. the ETS should be tghtened f moe enewable electcty s poduced. Jensen and Skytte use statc models fo the analyss of the mpact of geen cetfcates on electcty pces (2002) and the combnaton of geen cetfcates wth an ETS when an emsson and a enewable enegy goal s smultaneously tageted (2003). They fnd that the effect of a smple geen cetfcate maket on electcty pces s ambguous and that the optmal combnaton of nstuments to each two goals smultaneously depends on the cost stuctues. Recently, Rathmann (2007) used a model fo the analyss of the suppot fo enewable enegy by the Geman feed-n taff n ode to show that t can educe electcty pces fo cetan paamete values. Altogethe, these models neglect at least one of the followng aspects whch we take nto account n ou analyss: olgopolstc maket behavo of domnant fms, emsson tadng, estcted electcty tade and poducton capactes, and effects on poduce pces and fm pofts. We, theefoe, apply a computable patal equlbum model wth stategc behavo of domnant fms whch has been developed on the bass of the ognal model by Kemfet documented n Kemfet (2007). Followng ths model, a whole famly of models has been appled, among othes, to the analyss of behavoal assumptons and envonmental mpact, and of envonmental mpacts of demeges (Lse et al. 2006). Two majo efnements of the latte model have been acheved fo the pesent analyss. On the one hand, the model has been enlaged to cove the complete Euopean electcty maket whle, on the othe hand, the mpact of the coss subsdy nduced by the suppot fo enewable enegy has been mplemented. In the next secton, we ntoduce an algebac fomulaton of the model whch s followed by a descpton of the data concenng the tansmsson capactes between countes and the lagest playes on the electcty maket n Euope: plant types as well as cost- and emsson functons. In secton thee, we pesent esults concenng poduce and consume pces, emssons and the pofts of the lagest ffteen fms n Euope wth egad to nstalled capacty. 2
Dscusson Papes 712 2 The Model 2 The Model We model the Euopean electcty ndusty consstng of ndexed conventonal electcty poduces whch n total fom the set I. Each county s membe of the set of countes R. Each poducton level y the followng magnal cost and emsson functons: each fm s estcted by ts nstalled capacty o to the foegn county * such that y = s n of the fm coesponds to a cost and emsson level accodng to y and R, c ( y ) and ( y ) y e. The poducton y of y may be suppled to the home county. To put t dffeently, we assume that the supply of a fm s completely coveed by ts poducton. Futhemoe, the total electcty,* expot fom the home county to the foegn maket *, Ex, depends on the pce fo tansmsson sevce and s estcted by the tansmsson estcton,* Ex between the espectve countes. We assume that the maket fo tansmsson sevce cleas at the nonnegatve,*, *, *, *, pce fo tansmsson capacty τ such that: Ex Ex ( τ ) and τ = 0 fo tansmsson sevce nsde a county. The pemt pce σ s detemned on the emsson maket whch s estcted by the total emsson cap E and depends on the total demand fo emsson pemts of the electcty secto E ( σ ) and of the non electcty sectos that ae ncluded n the ETS: nely E ( σ ). Maket cleang on the emsson pemt maket esults n E = E + nely ( σ ) E ( σ ) and a nonnegatve pemt pce that s set to zeo f the maket does not clea. The poduce pce of electcty n each county s denoted by P. The consume pce P ( ) equals the sum of the poduce pce taff P S ( ) S ( ς S ) S fo conventonal poducton plus the aveage exta costs of the Z ς : P = P + P, whch yelds afte eaangng the poduce pce: P S Z ( ) ς = P. S S The poblem of fm can be stated as the followng Lagangan of the Kuhn-Tucke type: Z,, *, * L = P ( ) ς s C ( y ) σe ( y ) + κ ( y y ) τ s R S S * ( 1 ) The fst tem on the ght hand sde of equaton (1) sums up the evenues fom supply n all countes, the second tem accounts fo the poducton costs, the thd fo costs of emsson 3
Dscusson Papes 712 2 The Model pemts, and the fouth fo the shadow pce of the poducton capacty, whle the last sum accounts fo the tansmsson costs fo the estcted supply n foegn countes. The optmalty condtons to the poblem can be summazed n the followng way:, 0, s L 0,, s 0,, = s s L, 0 L L κ κ,, 0 κ 0 = L κ κ, I R, The man dve of the model s the devatve of the Lagangan w..t. the supply of the fm n a cetan egon: s L,, whch s dependent on the assumed maket behavo. In ou model we epesent two behavoal assumptons attbuted to -fms: pce takng behavo of mno actos and stategc behavo of domnant fms à la Counot, gvng se to a stuaton of mpefect competton. We stat wth the analytcally smple case of pce takng behavo. The devatve of the poblem of the pce takng fm w..t. supply can be wtten as: ( ) ( ) ( ) ( ) ( ) *,, y E y C Z P P s L τ κ σ ς + ( 2 ) Unde Counot behavo of the fms, the effect on the evenue caused by the choce of output s taken nto account by the fms. If we wte the esdual demand elastcty 2 as 0 0 P d dp = and the egonal maket shae of fm :, the devatve of the poblem (1) w..t. the supply n a Nash equlbum can be expessed as:, ϑ ( ) ( ) ( ) ( ) ( ) *,, y E y C Z P P s L τ κ σ ς + = ( ) ( ) ( ) + P Z P * * *, ς ϑ. ( 3 ) If we compae the optmalty condtons unde the Counot-Nash assumpton wth those of the pce takng case, t s appaent that only a tem whch depends on the maket shae s added 2 The esdual demand elastcty efes to the demand elastcty afte the supply of the pce takng fms s subtacted. 4
Dscusson Papes 712 3 Data and Calbaton n equaton (3). Ths last tem ncludes the Mak-up ϑ, P ( ), known fom conventonal olgopoly models, and a tem nduced by the feed-n taff ς whch educes the mak-up f the ( ς ), feed-n taff s geate then the maket pce P : ϑ P ( ) Z. The latte tem esults fom the fms conjectue about a constant output of the vals n the Nash-equlbum wth egad to a magnal change n own output. Consequently, the fm's buden on poducton nduced by the feed-n taff s dmnshed by an own,- hence total-, output ncease. We can now epesent the complete model wth pce takng behavo of mno actos and stategc behavo of domnant fms à la Counot. Theefoe, we ntoduce the bnay vaable whch s set to zeo n the case of pce takng fms and to 1 n the case of domnant fms. The combned optmalty condton fo pce takes and stategc fms can be expessed as: l L s, = p Z, * ( ) + ( P ( ) ς ) C ( y ) σe ( y ) κ τ * * * Z P ( ( ) ) ( P ς + ), l ϑ. ( 4 ) 3 Data and Calbaton The model uses extensve data on the owneshp and cost stuctue of the geneaton equpment of 25 countes connected to the Euopean electcty gd. The elevant tansmsson capactes ae estmated fom ETSO's ndcatve net tansfe capactes, whle the efeence demand and pces ae taken fom Euostat. The pemt demand of the non electcty sectos ae deved fom calculaton wth GTAP-E, Tuong (2007). All quanttes n the model efe to annual values, e.g. electc wok pe annum. The calbaton s acheved by the choce of the esdual demand elastcty as to eplcate the efeence values. In the followng, the supply, demand and tansmsson sde of the model ae descbed n geate detal. The supply sde of the model s epesented by a bottom-up appoach whee geneaton capactes ae chaactezed by the used enegy cae dammed wate, uanum, had coal, lgnte, natual gas and heavy ol and, n case of the themal powe plants, the technology that s appled. Altogethe the poducton capacty s epesented by ten technology classes as shown n Table 1. 5
Dscusson Papes 712 3 Data and Calbaton Table 1: Technologes of the conventonal powe plants n the model fuel type plant type effcency emssons facto vaable cost [kg/kwhel] [ -cent/kwhel] uanum small 0,32 0,00 0,66 lage 0,34 0,00 0,62 lgnte old 0,34 1,00 1,32 new 0,43 0,89 1,05 had coal old 0,34 0,74 1,59 new 0,43 0,68 1,26 natual gas conventonal ~0,38 ~0,52 ~2,76 combned cycle 0,55 0,33 1,91 heavy ol gas tubne 0,33 0,84 2,55 steam tubne 0,38 0,73 2,21 Souce: Own calculatons based on expet communcaton. Powe plants that bun sold fossl fuels and nuclea powe plants use steam tubnes fo electcty geneaton. These plants ae classfed nto effcency clustes angng fom 32 pecent n the case of small nuclea powe plants to 43 pecent fo compaatvely new had coal and lgnte fng unts. Natual gas and heavy ol ae used n powe plants equpped wth gas tubnes as well as steam tubnes. The combnaton of both technologes the so called combned cycle gas tubnes (CC) each the hghest effcences angng fom 52 to 59 pecent wth an aveage of about 55 pecent. In accodance wth these effcency paametes the vaable costs of the technologes ange between 0,21 and 1,05 Euocent/kWh and the specfc emssons between 0 and 1 kg CO 2 pe kwh as depcted n Table 1. The smulaton of stategc behavo demands a detaled assessment of the plant owneshp stuctue of the domnant playes. Theefoe, a database has been constucted manly on the bass of Glückauf (2006) and the eseach of annual epots. Table 2 summazes the capactes that ae avalable fo the ffteen lagest playes and the majo foegn subsdaes based on a multplcatve calculaton of effectve shaes n cases whee seveal owneshp layes ae pesent. Subsequently, we calculated fom these fgues estmated contnuous magnal costs and emssons functons fo annual electcty supply of the domnant fms and the compettve fnge n each county. The magnal cost functon of fm s y =, ( 5 ) C ( y ) a exp b y 6
Dscusson Papes 712 3 Data and Calbaton Table 2: Net capactes [GW] of the ffteen lagest fms n Euope [GWel] Hydo Nuclea Coal Gas & Ol Total EdF (F) 6,51 62,96 6,38 6,89 82,75 Enel (It) 2,43 0,00 8,48 22,18 33,09 E.ON (Ge) 1,51 7,64 11,25 5,35 25,75 RWE (Ge) 0,64 3,54 13,07 3,00 20,25 Endesa (Es) 1,95 2,63 6,76 5,97 17,32 Intenatonal Powe (GB) 0,00 0,00 12,16 4,96 17,11 E.ON (GB) 0,00 0,00 8,66 6,53 15,19 Vattenfall (Ge) 0,00 1,42 8,97 2,75 13,14 Vattenfall (S) 6,74 5,12 0,13 0,93 12,91 Ibedola (ES) 3,78 1,73 0,67 5,84 12,02 Btsh Enegy (GB) 0,00 9,28 1,72 0,00 11,00 D.E.I. (G) 2,95 0,00 4,72 1,60 9,27 Suez (Be) 0,00 4,68 1,32 3,15 9,14 EnBW/EdF (Ge) 0,43 4,02 3,08 1,48 9,01 Statkaft (No) 7,69 0,00 0,00 0,00 7,69 EDP (Pt) 3,03 0,00 1,81 2,04 6,88 FNM (Cz) 0,47 2,34 3,89 0,05 6,75 BOT (Pl) 0,00 0,00 6,30 0,37 6,67 Souce: Own calculatons based on nfomaton fom Glückauf (2006) and annual epots. whee y denotes the maxmum annual geneaton of fm n county. The emsson functons ae closely lnked to the poducton. Each poducton level of fm yelds n each peod a unque level of magnal emssons. The magnal emssons functon of fm poducton n county E ( y ) f exp g y s: y =. ( 6 ) The values fo the paametes of the magnal cost and emsson functons of the ffteen lagest fms epesented n the model ae lsted n Table 3. The tansmsson capactes between countes ae calculated fom ETSO (2006) net tansfe capactes whee summe and wnte ndcatve values ae equally weghted wth half a yea n ode to eceve maxmum annual tansfe capactes and ae summazed n Table 4. fo 7
Dscusson Papes 712 3 Data and Calbaton Table 3: Paametes of the magnal cost and emsson functons of the ffteen lagest fms n Euope y a b f g EdF (F) 613,8 0,6 0,4 0,0 2,1 Enel (It) 242,3 1,8 0,0 0,6 0,1 E.ON (Ge) 188,7 1,3 0,2 0,5 0,2 RWE (Ge) 149,6 1,5 0,1 0,7 0,1 Endesa (Es) 126,3 1,5 0,1 0,5 0,2 Intenatonal Powe (GB) 124,3 1,8 0,0 0,8 0,1 E.ON (GB) 110,9 1,8 0,0 0,8 0,1 Vattenfall (Ge) 97,6 1,5 0,1 0,8 0,1 Vattenfall (S) 90,7 0,7 0,9 0,2 0,5 Ibedola (ES) 86,4 1,1 0,3 0,2 0,6 Btsh Enegy (GB) 82,2 0,8 0,3 0,1 2,0 D.E.I. (G) 68,4 1,2 0,3 0,2 0,5 Suez (Be) 66,4 1,1 0,2 0,6 0,3 EnBW/EdF (Ge) 66,4 1,1 0,2 0,3 0,4 EDP (Pt) 50,0 0,9 0,0 0,4 0,4 FNM (Cz) 49,9 1,1 0,1 0,6 0,3 BOT (Pl) 49,3 1,5 0,0 1,0 0,0 Souce: Own calculatons. The paametes of the demand sde, efeence demand and pces, ae aveage electcty exchange 3 pces of the yea 2006 o ae taken fom Euostat (2006) whee a ffty pecent dscount fo tansmsson and dstbuton sevces nsde the countes s appled to the Euostat fnal consume pces. Fo the calbaton of the model the esdual demand elastcty the nvese so-elastc demand functon ( ) ( ) 1 0 P 0 of P = s chosen to eplcate the benchmak values fo pces and quanttes n Gemany unde pce takng behavo of mno actos and stategc behavo of domnant fms à la Counot. The value fo the esdual demand elastcty found fo a good eplcaton of the benchmak unde a assumed pemt pce of 20 Euo pe ton of CO 2 has been 0.5. 3 Amstedam Powe Exchange (apx), Amstedam; Powenext, Pas; Euopean Enegy Exchange (EEX), Lepzg; Mecado de Electcdad (OMEL), Madd; NodPool, Oslo. 8
Dscusson Papes 712 3 Data and Calbaton Table 4: Tansmsson capactes [TWh/a] between countes fom\to Ge FR AT BE Ch Cz DK SE Pl NL ES FI GB Ge nf 42,0 12,3 30,7 7,0 11,8 3,7 11,8 34,2 FR 20,4 nf 17,7 28,8 11,4 17,5 AT 12,3 nf 10,5 4,8 BE 23,0 nf 19,1 Ch 35,0 20,1 11,8 nf Cz 16,9 8,8 nf 6,6 DK 15,3 nf 19,2 SE 4,9 16,4 nf 5,0 16,6 Pl 9,6 15,6 1,3 nf NL 25,8 18,8 nf ES 6,6 nf FI 13,1 nf GB 0,4 nf GR HU 5,9 IT 22,1 1,8 25,9 NO 8,8 29,3 0,6 PT 6,1 SK 7,0 5,8 S 5,1 EE 2,8 Lt Lv BG RO fom\to GR HU IT NO PT SK S EE Lt Lv BG RO Ge FR 22,1 AT 3,1 1,8 5,1 BE Ch 25,9 Cz 14,9 DK 8,3 SE 26,5 Pl 5,9 NL ES 8,0 FI 0,9 2,8 GB GR nf 3,5 4,8 HU nf 3,5 4,4 IT 4,4 nf 3,4 NO nf PT nf SK 9,1 nf S 3,0 nf EE nf 6,8 Lt nf 17,5 Lv 8,8 17,5 nf BG 2,6 nf 7,0 RO 3,3 8,1 nf Souce: Own calculaton on the bass of ETSO (2006). 9
Dscusson Papes 712 4 Results Fnally, on the maket fo emsson pemts, the total supply s fxed by the amount of pemts that ae allocated by the natonal authotes. As the model s calbated on values of the yea 2006, the allocaton of the fst tadng peod s boken down nto annual allocaton apples. We assume a total allocaton fo one yea to be 2234 mllon tons of cabon doxde. 4 The demand sde of the emsson maket can be boken down nto two pats,.e. the demand of the electcty secto whch s calculated dectly by the EMELIE model, and the demand of the non-electcty emsson tadng sectos. The detemnaton of the non-electcty pemt demand smulatons based on the GTAP-E model yelded the followng pemt demand of the non-electcty emsson tadng secto n dependence of the pemt pce σ : ( σ ) =1032 40.35ln( σ ) nely E, ( 7 ) whee the fst tem on the ght hand sde s the baselne emssons and the second tem epesents the pemt supply cuve of the non electcty secto. 4 Results In the followng paagaphs, thee scenaos unde olgopolstc behavo of domnant fms ae pesented. The baselne fo 2006, Scenao A, ncludes a feed-n taff of the cuent values fo the yea 2006,.e. 10.3 Euocent/kWh as n VDN (2006) and an amount of suppoted enewable electcty of 53 TWh as stated by BMU (2007). Table 5: Effects of the feed-n taff on pces, supply and emssons electcty pces pemt pce total supply electcty emssons cent/kwh /ton of CO 2 TWh Mt CO 2 scenao poduce consume Gemany Euope A 4,3 4,8 20 582 302 1230 B 4,5 4,5 20 601 350 1280 C 4,7 4,7 23,1 585 335 1235 In scenao B, we fx the emsson pce at the level of scenao A and exclude the feed-n n ode to decompose the solated electcty maket effect wth no feed-back of pemt pces. Fnally, we calculated scenao C whee no feed-n apples and, due to nceased poducton n pollutng plants, the pemt pce s sgnfcantly hghe compaed to scenao A. Table 5 po- 4 The fgue s n lne wth DEHST (2005) and the nfomaton on the ntenet page of the Euopean Commsson whle takng the the opt-n eseve nto account. 10
Dscusson Papes 712 4 Results vdes an ovevew of esults. Appaently, the consume pce of electcty nceases by only 0.1 Euocent/kWh and consequently the total supply n Gemany s educed by only about 3 TWh. Howeve, the pce fo emsson pemts s sgnfcantly educed by the feed-n by about 3.1 Euo pe ton and the poduce pce fo electcty n Gemany s also consdeably loweed. Fgue 1 demonstates the esults fo the Geman poduces pce fo electcty n geate detal. Fgue 1: Effect of the feed-n on the Geman poduce pce poduce pce [ -cent/kwh] 4,8 σ 4,6 4,4 Z 4,2 500 520 540 560 580 600 620 640 conventonal poducton [TWh/a] When we move fom pont C, the stuaton wth out the feed-n taff, to pont A whch epesents the cuent stuaton, we fnd a educton of about 0.4 Euocent/kWh nduced by the feed-n taff. As mentoned, the scenao choce facltates the decomposton of the total effect nto two sepaate effects. A fst effect, tggeed by the substtuton of less expensve conventonal souces by moe expensve enewable enegy, temed substtuton effect n the followng. And a second effect, the pemt pce effect, nduced by the dop n pemt pces σ. The substtuton effect tself conssts of two components: Substtuton of conventonal supply by enewable enegy Z leadng to a shft of the dotted demand fo conventonal electcty, Intoducton of a gap between consume and poduce pces whch coesponds wth a downwad move on the demand functon fo conventonal electcty. 11
Dscusson Papes 712 4 Results Fgue 2: Effect of the feed-n on Geman electcty secto emssons 24 pemt pce [ /t of CO2] 23 22 21 20 Z σ 19 290 300 310 320 330 340 350 360 emsson [Mt/a] In total, we fnd that both effects ae negatve and of the same sze,.e. -0.2 Euocent/kWh each. Ths s a emakable esult snce pevous wok mostly neglects ths effect (Bode 2006). In the emande of the atcle, we analyze the mpact of the feed-n taff on emssons and pofts of the electcty secto. In egad to emssons, the pctue depends on the scope of the analyss. If we focus on Gemany, the esults ae sgnfcantly lage than those we get fo Euope. The oveall effect essentally depends on the slope of the pemt demand ndcated wth dotted lnes n Fgue 2 whch shows both effects fo Gemany. In accodance wth the substtuton effect tggeed by the ntoducton of enewable enegy, the emsson effect of the feed-n taff unde constant pemt pces s clealy negatve the enewable enegy s assumed to poduce no emsson and of a sze of about 48 Megatons of CO 2. Ths effect s patally compensated by the educton of pemt pces and the subsequent ncease by about 15 Megatons of CO 2 such that the emsson educton n the Geman electcty secto s only about 33 Megatons of CO 2 n total. On the contay, the total sectoal emsson n Euope deceases by a mee 4 Megatons of CO 2. Hee, the effect nduced by the dop n pemt pces of 27 Megatons of CO 2 almost compensates the effect that s due to substtuton of dty souces by enewable souces whch sums up to 31 Megatons of CO 2. Fnally, we pesent the mpact of the feed-n on the poft of poduces lsted n Table 6 below. In the poft column, the poft fom the opeaton of the powe plants ae gven n mllons of Euo annually. It appeas that n a lbealzed maket Eléctcté de Fance (EdF) 12
Dscusson Papes 712 4 Results clealy has the most poftable geneaton assets wth an annual poft of almost 12 bllon Euo followed by compaably lage companes wth low cabon assets lke E.ON Gemany and Btsh Enegy wth about 3 and 2 bllon Euo poft fom plant opeaton espectvely. These companes ae followed by Dmosa Epches Ilektsmou (D.E.I) of Geece, the patly EdF contolled Enege Baden-Wüttembeg (EnBW) of Gemany, Span's Ibedola and Gemany's Rhensch-Westfälsches Elektztätswek AG (RWE) wth oughly 1.8, 1.4, 1.4, and 1.2 bllon Euo espectvely. These leadng companes ae followed by companes that ae ethe smalle o have a moe costly poducton angng fom Italy's Ente Nazonale pe l Enega Elettca (Enel) wth one bllon Euo poft to Polsh Belchatow, Opole and Tuow powe plants (BOT) wth a poft of only about 26 mllon Euo fom plant opeaton. The total effect on the pofts of the lagest fms that s caused by the Geman feed-n taff can be detected fom the last column n Table 6 and has agan been sepaated nto the two basc effects caused by substtuton of souces and by the change n pemt pces. We fnd that the fms ae affected dffeently. On the one hand, fms ncu negatve o at best zeo mpacts on the pofts due to the substtuton effect. Hee, the Geman fms ae affected the most wth losses of 126 mllon Euo fo EnBW, 379 mllon Euo fo Vattenfall Gemany, 467 mllon Euo fo RWE and 650 mllon Euo fo E.ON Gemany. At the same tme, fms that ae emote to the Geman maket and loosely connected by the electcty gd ae not affected by a substtuton effect lke the fms n Geat Btan, Span and Potugal. Contaly, the pemt pce effects on fms ae ambguous. Clealy, fms wth hgh emsson factos lke RWE, Vattenfall Gemany, and Enel beneft the most fom a dop n pemt pces whle fms wth compaatvely low CO 2 emssons lke EdF, Btsh Enegy and E.ON ae negatvely mpacted by the pemt pce decease: Fms wth low emssons lose some of the compaatve advantage ove dty fms f the pemt pce deceases. In egad to the total effect, most of the fms ae mpacted negatvely by the feed-n taff wth the excepton of fms that ae compaatvely dty o emotely located to the Geman maket lke Enel, E.ON Geat Btan, Endesa o BOT. 13
Dscusson Papes 712 5 Conclusons Table 6: Effects of the Geman feed-n taff on Euopean electcty secto pofts [mllon Euo] poft feed-n effect on poft Mo feed-n no feed-n substtuton pemt pce total EdF (F) 11794 11981-57 -130-187 E.ON (Ge) 2918 3596-650 -27-677 Btsh Enegy (GB) 2100 2204 0-103 -103 D.E.I. (G) 1805 1838-10 -23-33 EnBW/Edf (Ge) 1435 1636-126 -75-201 Ibedola (ES) 1381 1377 0 4 4 RWE (Ge) 1171 1527-467 111-356 Enel (It) 1046 961-11 97 86 Vattenfall (S) 984 1006-11 -12-23 EDP (Pt) 941 923 0 18 18 Vattenfall (Ge) 748 1024-379 102-276 FNM (Cz) 449 498-37 -12-49 Endesa (Es) 356 310 0 46 46 Suez (Be) 120 115-2 7 5 E.ON (GB) 88 60 0 27 27 Inteatonal Powe (GB) 49 26 0 23 23 BOT (Pl) 26 14-9 20 11 5 Conclusons We nvestgated effects of the Geman feed-n taff wth a bottom-up model fo the electcty maket of Euope and analyzed mpacts on poduce as well as consume pces, electcty secto emssons n Gemany and Euope as a whole, and on the fm's pofts fom plant opeaton. We found that, whle the buden of the feed-n taff pe total output amounts to 0.5 cent pe klowatt hou, the consume pce s mpacted only to a mno extend,.e. plus 0.1 Euocent pe klowatt hou, compaed to the sgnfcant decease n poduce pce of about 0.4 Euocent pe klowatt hou. The poduce pce effect ntoduced by the feed-n can be sepaated nto a substtuton and a pemt pce effect of oughly equal sze,.e. -0.2 Euocent pe klowatt hou, whch emphaszes the mpotance of feed backs fom the emsson maket. These feed backs also lead to a educed mpact on emssons n the electcty secto. Whle unde constant emsson pces, the emssons fom the Geman electcty secto ae educed by about 48 mega tonnes of CO 2 due to the substtuton of conventonal enegy, the pemt pce effect nceases the Geman electcty maket emssons by oughly 15 mega tonnes of CO 2 such that the total sectoal educton n Gemany amounts only to 34 mega tonnes of CO 2. Moeove, f we consde the whole Euopean electcty secto emsson, we fnd an 14
Dscusson Papes 712 5 Conclusons nsgnfcant decease n emssons. Of couse, the total emssons of the whole ETS sectos ae not affected, whch endes the enewable suppot neffectve egadng emsson educton f the oveall emsson cap s not adjusted. Fnally we nvestgated the effects of the feedn on the pofts of fms and found a ambguous effect. Two chaactestcs of the fms ae cucal: the physcal connecton wth the Geman maket and the emsson ntensty. Whle the unambguously negatve substtuton effect does not apply to fms that ae not dectly connected wth the Geman electcty gd, the pemt pce effect s detemned by the fms emsson ntensty. We fnd that fms that ae only loosely connected wth the Geman gd and have hgh emssons ae lkely to beneft fom the Geman feed-n taff. At the same tme, fms wth low emssons on o close to the Geman maket suffe losses. In lght of the dscusson n the lteatue, we cannot confm a theoetcally possble decease n consume pces by enewable enegy suppot, even though the ncease of Geman consume pces s only of mno sze. Moeove, n egad to effects on emssons, ou fndngs ae n lne wth the teatment of Modhost (2003) nsofa as enewable enegy nduced emsson eductons n one county wll, n pat, be compensated by nceases n othe countes. A conceted polcy mght, theefoe, be suggested. In ode to assess the poblem of a optmal conceted acton of emsson polcy and enewable suppot, the cost stuctue of the enewable enegy souces has to be consdeed n futue eseach. 15
Dscusson Papes 712 Appendx Appendx: Notaton I R Set of fms Set of egons P ( ) Invese demand fo electcty n county P 0 P S σ 0 Consume pce of electcty n county n the base peod Poduce pce of electcty n county Emsson pemt pce Electcty consumpton n county Electcty consumpton n county n the base peod E ( σ ) Total emssons of the electcty secto nely ( σ ) E Total emssons of the non electcty secto,* Ex Expot fom county to * y Electcty poducton of fm Total electcty supply n county s, Electcty supply of fm n county S Z ς Total electcty supply of fms n county Renewable electcty poducton n county Feed-n taff n county C ( y ) Magnal costs of electcty poducton of fm wth costs C ( y ) E ( y ) Magnal emssons of electcty poducton of fm y Capacty estcton of powe plants of fm,* Ex Tansmsson estcton fom county to * κ Shadow pce of capacty estcton of nstalled powe plants of fm n county,* τ Shadow pce of tansmsson capacty fom county to * Resdual demand elastcty, ϑ Maket shae of fm n county l Bnay vaable epesentng dffeent behavoal assumptons wth egad to fm a, b Axs ntecept and slope paamete of the magnal cost functon of fm f, g Axs ntecept and slope paamete of the magnal emsson functon of fm 16
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