The structural impact of renewable energy support schemes on electricity markets

Past event — 16 April 2014

Kühne Logistics University
Grosser Grasbrook 17, 20457 Hamburg

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Ingmar Ritzenhofen


Renewable energy sources (RES) capacity has grown globally at a rapid rate benefiting from multiple support schemes such as renewable portfolio standards (RPS), feed-in-tariffs (FIT), and market premia (MP). While research concentrated on comparing the effectiveness of these policy instruments in driving RES investment, the focus is increasingly shifting towards assessments of the structural impact of these schemes on electricity markets. RES support schemes are continuously being assessed on how they help achieve the three main objectives of electricity policy, i.e. the affordability, reliability and sustainability of electricity supply. In this work, we quantitatively compare RPS, FIT and MP schemes in these three dimensions by assessing their future impact on electricity prices, on generation portfolios and security of supply as well as on carbon emissions. We simulate the impact of all three support schemes using a long-term capacity expansion model with an hourly granularity for a time horizon of 60 years. We find that all support schemes increase RES penetration and thereby help reduce CO2 emissions. However, MP and FIT schemes can achieve these effects at lower cost, while RPS schemes deliver more robust results. Our findings provide insights to regulators, utilities and investors on the consequences of current regulation and possible alternatives. More specifically, we are able to show and quantify the trade-offs faced by a regulator aiming to increase RES penetration while containing total cost of electricity supply. We apply our model in a case study of California and show that the assessment of these trade-offs differs depending on the characteristics of the specific electricity market.

About the presenter

Ingmar Ritzenhofen joined the chair of Logistics Management at WHU as a research assistant and Ph.D. student in October 2012. In his research, he analyzes investments in electricity generation capacity under uncertainty using a real options approach. In particular, he focuses on investigating the impact of renewable energy support schemes such as feed-in-tariffs and the regulatory uncertainty surrounding them on the propensity to invest in renewable energy sources.
Ingmar Ritzenhofen graduated as Master of Science in International Business from HEC Paris and Master in International Management from the CEMS program in 2010. In 2009 he earned a Bachelor of Science from WHU with specializations in Finance, Supply Chain Management and Strategy. In his Bachelor thesis, Ingmar Ritzenhofen studied the real options value of flexibility in supply chains at the example of a major international automotive supplier. In his Master thesis at the chair of Finance & Energy at HEC he analyzed the relationship between power forward sales and the price of carbon emission certificates. In the course of his studies Ingmar Ritzenhofen spent two semesters at Universidad Adolfo Ibañez in Viña del Mar in Chile and ESADE Barcelona.
After his studies, Ingmar Ritzenhofen worked as a consultant for McKinsey & Company from 2010 to 2012. He was primarily involved in projects in the automotive and logistics industry in Germany and China. Already during his studies he gained significant work experience during internships: 2009 for McKinsey & Company in Cologne in the automotive and logistics industry, 2008 for Morgan Stanley in Frankfurt in the area of Mergers and Acquisitions and 2007 at CNC-Communications and Network Consulting in the area of strategy and communications in New York.

About the Seminar

The KLU research seminar series is a regular meeting of PhD students, Post-Docs and professors who conduct research in the field of logistics and supply chain management. The research seminar is open to the public and we happily welcome guests.