Renewable Electricity Policy and Market Integration

Thomas Tangerås ()

No 968, Working Paper Series from Research Institute of Industrial Economics

Abstract: I analyze renewable electricity policy in a multinational electricity market with transmission investment. If national policy makers choose support schemes to maximize domestic welfare, then a trade policy motive arises operating independently of any direct benefit of renewable electricity. The model predicts electricity importing (exporting) countries to choose policies which reduce (increase) electricity prices. A narrow pursuit of domestic objectives distorts transmission investment, thereby market integration, below the efficient level. Distortions cannot be corrected by imposing national renewable targets alone. Instead, subsidies to transmission investment and a harmonization of and reduction in the number of policy instruments can improve welfare.

Keywords: Market integration; Renewable electricity; Trade policy; Transmission investment (search for similar items in EconPapers)
JEL-codes: D23 F15 Q48 Q56 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-06-27
New Economics Papers: this item is included in nep-ene and nep-reg
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Journal Article: Renewable Electricity Policy and Market Integration (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0968

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