Quantifying the effects of different support policies for renewables on European electricity markets

Abstract

Shares of renewables in European electricity markets are increasing based on different support policies. The paper discusses to what degree the design of these policies and their implementation on a European level impacts the type and quantity of effects that renewables have on electricity markets. Contrary to initial expectations simulations show that the (theoretically more market-oriented) quota scheme does not necessarily have less impact on market prices than a feed-in tariff or a feed-in premium. The most important driver for all effects is however unsurprisingly the overall share of renewables in the electricity mix. The effects can be substantially mitigated by expanding the European grid infrastructure: higher interconnector capacities allow for a less volatile market environment. The influence of the support scheme on the bidding behaviour of renewables was however not taken into account in the analysis.