Investments in Liberalized Electricity Markets and the Low-Carbon Energy Transition: A Mixed-method Analysis of the German Case [Elektronische Ressource] / Michael Pahle. Betreuer: Ottmar Edenhofer

Michael Pahle

Informations

• Publié par: technische_universitat_berlin
• Publié le: 01 janvier 2011
• Nombre de lectures: 10
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Investments in Liberalized Electricity Markets
and the Low-Carbon Energy Transition:
A Mixed-method Analysis of the German Case
vorgelegt von
Diplom-Physiker
Michael Pahle
geboren in Mainz
von der Fakultät VI – Planen Bauen Umwelt
der Technischen Universität Berlin
zur Erlangung des akademischen Grades
Doktor der Wirtschaftswissenschaften
Dr. rer. oec.
genehmigte Dissertation
Gutachter:
Prof. Dr. Ottmar Edenhofer
Prof. Dr. Thomas Bruckner
Promotionsausschuss:
Prof. Dr. Volkmar Hartje (Vorsitz)
Prof. Dr. Ottmar Edenhofer
Prof. Dr. Thomas Bruckner
Tag der wissenschaftlichen Aussprache: 17.06.2011
Berlin 2011
D832 ContentsContents
Summary 7
Zusammenfassung 8
1 Introduction 11
1.1 Climate Change & Power Supply 12
1.2 Problem Dimensions 16
1.2.1 Political Dimension 16
1.2.2 Economic 19
1.2.3 Technological Dimension 21
1.3 The German Case 24
2 Germany’s dash for coal: Exploring drivers and factors 35
2.1 Introduction 36
2.2 Investments in generation capacity 37
2.2.1 Historic investments 37
2.2.2 Investments in the newly liberalized market 37
2.2.3 Current investments and plans 38
2.2.4 Investments since 2001 in comparison: trend and counter-trend 39
2.3 Exploring drivers and decision factors 39
2.3.1 CO2 emission costs and windfall profits (EU ETS) 39
2.3.2 Fuel costs 40
2.3.3 Capital costs and financing 41
2.3.4 Market and generation 41
2.3.5 Cost structure comparison 42
2.3.6 Carbon capture and storage 42
2.3.7 Thermal efficiency 43
34 Contents
2.3.8 Replacing and siting 44
2.3.9 Public acceptance 45
2.3.10 Political support for coal 45
2.4 Conclusions 46
3 How emission certificate allocations distort fossil investments: The German
example 49
3.1 Introduction 50
3.2 Methodology and model 51
3.2.1 Investment rationale 51
3.2.2 Price formation, generation, and CO2 cost pass-through 52
3.2.3 Limitations 54
3.3 Model application 55
3.3.1 EU ETS and German allocation rules 55
3.3.2 EU ETS and German rules 55
3.3.3 Fuel costs 55
3.3.4 Capital and O&M costs 56
3.3.5 Generation capacities 56
3.3.6 Demand 56
3.3.7 Discount rates and financial lifetime 57
3.4 Results 58
3.4.1 Overview 58
3.4.2 CO2 regulation under different allocation rules 58
3.4.3 Sensitivity to fuel prices and capital costs 59
3.4.4 Free allocation period length and discount rate 60
3.4.5 Sensitivity to asymmetric pass-through rates 60
3.5 Conclusions 61
4 Investments in Electricity Markets with Imperfect Competition: Technology
Choice and Optimal Carbon Pricing 63
4.1 Introduction 64
4.2 Methodology & Model 68
4.3 Calibration & Assumptions 72
4.3.1 Demand & Supply 72
4.3.2 Technologies & Capacities 74
4.3.3 Costs & Technological Parameters 75Contents 5
4.4 Application & Results 77
4.4.1 No Regulation 77
4.4.2 CO2 Pricing 80
4.4.3 Welfare Analysis & Optimal Pricing 82
4.5 Discussion & Conclusion 86
5 Synthesis, Discussion & Further Research 91
5.1 Review & Discussion of Methods 93
5.1.1 Qualitative Scoping of Investment Drivers & Decision Factors 93
5.1.2 Quantitative Market Models 94
5.1.3 Methodical Lessons 97
5.2 Synthesis 98
5.3 Further Research 100
Statement of Contribution 105
Acknowledgements 1076 ContentsSummary
Because of the high number of low-cost mitigation options the power sector will play an
important role in combating global climate change. Given the current worldwide trend of
liberalization, the main challenge is to incentivize investments in low-carbon technologies
under market rules. This thesis investigates the combined questions of how investments
are made in liberalized electricity markets, and to which extent climate policy instruments
are effective in inducing cleaner technology choice. It uses Germany as a case study,
where during the last years a considerable number of new coal power plants have been
brought on the way. This "dash for coal", apparently contradicting political efforts to
transform the energy system, serves as the guiding issue around which several aspects of
the aforementioned questions are investigated.
The first analysis explores the drivers and decision factors that likely triggered the "dash
for coal". Because no integrated theory of investments in liberalized electricity markets
yet exists, it compiles a list of potentially influential economic, technological and socio-
political factors in a first step. Examining these factors in more detail in a second step, it
turns out that the extensive coal investments can be attributed to six main reasons. They
are: (1) replacement requirements due to the nuclear phase out, (2) the onset of a new in-
vestment cycle in the power market, (3) favourable economic and technological prospects
for coal compared to natural gas in the long run, (4) a status-quo bias of investors in re-
gard to future renewable deployment, (5) explicit political support for coal, and (6) the
ineffectiveness of public protest in hampering new projects. Two of these are looked at in
more detail in the succeeding parts of this thesis.
The second analysis deals with how emission certificate allocations had distorted fossil
investments in favour of coal technologies. The EU Emission Trading Scheme (EU ETS),
implemented in 2005, was set up to incentivize cleaner investments by putting a price on
CO emissions through tradable certificates. However, in its first phase initial certificate2
allocations for new plants in Germany were technology specific, leading to a considerably
higher number of total certificates for coal compared to natural gas. Because suppliers in-
curred windfall profits by passing-through the opportunity costs of these certificates, coal
plants were expected to receive higher additional cash flows than natural gas plants, which
effectively subsidized coal. In fact, results suggest that disproportionate windfall profits
compensate more than half the total capital costs of a hard coal plant. Only auctioning of
certificates or a single best available technology benchmark would have made natural gas
the predominant technology of choice. This underlines that implementation details had
a great impact on investment incentives, unintentionally increasing the edge of coal over
natural gas rather than decreasing it.
78 Zusammenfassung
The third analysis leaves the level of the single investor and looks at how the market as a
whole responds to a price on CO under the situation of a nuclear phase out that induces2
consideral replacement investments. More specifically, it investigates technology choice
and the optimal CO price level from a welfare perspective. Motivated by the structure of2
the German market where four big suppliers own the major share of capacities, imperfect
competition with strategic behaviours by these suppliers is assumed. Moreover, based
on the finding of the first analysis, investments in coal plants are limited to the strategic
suppliers, which adds a so called technological market power. Model results indicate
that in such a setting investments in natural gas occur at lower CO price levels and more2
gradually than in a perfect competitive market. This happens due to the strategic reduction
of output that increases electricity prices, which in turn makes natural gas profitable even
when the comparative advantage in emission costs is still low. In a perfect competitive
market though, investments switch from exclusively coal to exclusively natural gas when
the CO price is 37 EUR/t or higher. Furthermore, the impact of market power on overall2
welfare is relatively moderate and losses never exceed 1% if the price of CO is set at the2
optimal level. This shows that a price on CO can indeed be a suited instrument to induce2
investments into cleaner technologies, especially natural gas. Nevertheless, relatively
high prices are needed for a fundamental transition, and it remains to be seen if this will
become reality in the future.Zusammenfassung
Aufgrund der großen Zahl günstiger Vermeidungsoptionen spielt der Stromsektor im
Kampf gegen den globalen Klimawandel eine wichtige Rolle. In Anbetracht der weltweit
stattfindenden Liberalisierungen besteht die Hauptaufgabe darin, Anreize für Investitio-
nen in kohlenstoffarme Technologien im Umfeld der Märkte zu schaffen. Diese Ar-
beit untersucht die miteinander verbundenen Fragen, wie Investitionen in liberalisierten
Strommärkten getätigt werden, und in welchem Umfang klimapolitische Instrumente eine
"saubere" Technologiewahl induzieren können. Als Fallbeispiel dient Deutschland, wo
innerhalb der letzten Jahre eine größere Zahl neuer Kohlekraftwerke in Bau gegangen
sind. Dieser Dash for Coal, der offensichtlich im Widerspruch zu aktuellen politischen
Bemühungen hinsichtlich des Umbaus des Energiesystems steht, wird als Ausgangspunkt
genommen, um verschiedene Aspekte der erwähnten Fragen genauer zu untersuchen.
Die erste Untersuchung erkundet die Treiber und Entscheidungsfaktoren, die vermutlich
zum Dash for Coal geführt haben. Weil eine umfassende Theorie von Investitionen in
liberalisierten Strommärkten noch nicht zur Verfügung steht, wird in einem ersten Schritt
eine Liste mö