21 Feb 2019 09:30am

Workshop: Locational Investment Signals for Electricity Generation

Lion Hirth is Assistant Professor of Governance of Digitalisation and Energy Policy at the Hertie School of Governance. His research interests lie in the economics of wind and solar power,...

To steer electricity investments in the right location, one could rely on price signals from wholesale energy markets. For an investment signal within the borders of existing bidding zones, that would mean market splitting or a transition to nodal pricing. An alternative is to use additional, out-of-the-market design elements for locational incentives, such as:

  • Deep connection charges (used in many Eastern European countries)
  • Locational-specific grid usage fees for generators (used in Sweden and the UK)
  • Capacity auctions / mechanisms with a locational resolution (like PJM’s locational adder or France’s procurement of a gas turbine in Bretagne)
  • No-exit-regulation for existing capacity (think of Germany’s grid reserve)
  • Locational components in support schemes (e.g., Mexico’s RE auctions or Germany’s Referenzertragsmodell

We screened a dozen power systems globally and compiled a list of mechanisms and instruments. This empirical research aims to understand such locational investment signals better and to compare different approaches worldwide.

During the workshop, we will discuss our findings and their implications with industry stakeholder to understand their views on these approaches.


CORE Partners