Putting wind and solar in their place: Internalising congestion and other system-wide costs with enhanced contracts for difference in Great Britain

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Provides the evidence to overcome challenges associated with scaling up local energy systems to stimulate market uptake

The large-scale deployment of renewable energy assets can create system-wide costs due to the impact on congestion management and reserve provision.  If renewable energy assets are curtailed it could limit their effect on reducing carbon emissions.

This report highlights how the successful GB incentive scheme for renewable energy, termed ‘Contracts-for-Difference (CfD)’, can be further enhanced by introducing cost components to account for these system-wide effects. The case studies show that one additional MWh of renewable generation in the northern regions of GB increases congestion management cost by £5.61/MWh (14% of the CfD2019 price), and that the potential carbon emission abatement is reduced by 9% (23.52 kgCO2/MWh) due to grid re-dispatch. By contrast, the deployment in the southern regions can decrease congestion cost by £4.04/MWh, and can increase potential carbon abatement by 17% (44.33 kgCO2/MWh). One additional MWh of intermittent wind generation in GB can increase reserve provision cost by £6.58/MWh, while a perfectly predictable technology would decrease reserve cost by £2.44/MWh.

Download report pdf here

Authors:  Iacopo Savelli, Jeffrey Hardy, Cameron Hepburn, Thomas Morstyn

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