Strategic Scenario Analysis (START)

The identified locational investment instruments can be grouped into five classes: locational electricity markets, deep grid connection charges, grid usage charges, capacity mechanisms, and renewable energy support schemes. The analysis shows that all countries use at least one of these instruments. Surprisingly, most systems, including jurisdictions that apply nodal pricing, use multiple locational instruments in parallel. Yet, there does not exist a single instrument, which is used in a majority of countries – indicating that no single best solution exists. The quantification of instrument reveals a wide variation of resulting locational price and revenue differences. Overall, locational signals are often stronger for renewable energy sources than for conventional generation. We identified as major challenges for most instruments a lack of credibility, missing transparency and insufficient spatial accuracy. Moreover, we found that some of the instruments distort an efficient dispatch of power generation through undesired short-term signals.

The research results were compiled in a scientific article, which was published in The Energy Journal under the title Locational Investment Signals: how to steer the siting of new generation capacity in power systems?

Potsdam Institut für Klimafolgenforschung (Lead)

Mercator Research Institute on Global Commons and Climate Change

Westfälische Wilhelms-Universität Münster, German Aerospace Center

German Institute for Economic Research

University of Melbourne

Australian National University

Royal Melbourne Institute of Technology

Monash University

Federal Ministry of Education and Research (Germany)

01.10.2017 – 30.09.2019