Not logged in.

Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title The value of gas-fired power plants in markets with high shares of renewable energy
Organization Unit
Authors
  • Lena Hörnlein
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Energy Economics
Publisher Elsevier
Geographical Reach international
ISSN 0140-9883
Volume 81
Page Range 1078 - 1098
Date 2019
Abstract Text Using a real options model, this paper quantifies a gas-fired power plant’s operating value and the value of a new investment against the background of a market transition to renewable electricity. The model is run with recent data for Germany’s power sector and for different types of gas-fired power plants. The result is twofold. First, the paper achieves a more realistic value by improving on existing models: it models electricity and gas prices as a two-dimensional stochastic process, each component consisting of the sum of a seasonal pattern and a mean-reverting process; it uses high granularity by modelling hourly time-steps; and it incorporates power plant ramping times and costs. Second, it compares two types of power plant models, one with daily and one with hourly operating decisions, and thereby quantifies the value of a plant’s intraday flexibility. The hourly model replicates operators’ and investors’ decision making accurately. This is evidenced by the fact that the results trace current major developments like the recent decline and come-back of gas-fired generation in Germany. The paper contributes to a better understanding of the choices operators and investors face in current electricity markets. In the absence of large scale storage solutions flexible supply of electricity, as provided by gas, is important in the transition to renewable energies in Germany and across Europe.
Official URL https://www.sciencedirect.com/science/article/pii/S0140988319301276?dgcid=rss_sd_all
Digital Object Identifier 10.1016/j.eneco.2019.04.013
Other Identification Number merlin-id:17773
Export BibTeX
EP3 XML (ZORA)