How regional differences in cost of capital influence the optimal design of power systems
In order to reduce greenhouse gas emissions of the power sector, high shares of renewable power sources need to be integrated into existing systems. This will require vast amounts of investments. Cost of the capital needed for these investments are unevenly distributed among European regions. They s...
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Main Authors | , |
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Format | Journal Article |
Language | English |
Published |
12.03.2019
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Subjects | |
Online Access | Get full text |
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Summary: | In order to reduce greenhouse gas emissions of the power sector, high shares
of renewable power sources need to be integrated into existing systems. This
will require vast amounts of investments. Cost of the capital needed for these
investments are unevenly distributed among European regions. They show a clear
North-South and West-East divide, which has not exhibited significant signs of
narrowing in recent years. Power system studies investigating a continent-wide
European power system, however, usually assume homogeneous cost of capital.
The objective of this paper is to investigate how regional differences in
cost of capital affect the result of these studies with respect to the optimal
power system design. Our analysis is based on power system optimization with
inhomogeneous cost of capital in Europe. We find that assuming homogeneous cost
of capital leads to estimates on the levelized costs of electricity in a highly
renewable European power system, which are too conservative. The optimal system
design is significantly affected compared to an inhomogeneous scenario. In
particular, we show that inhomogeneous cost of capital favors overall wind
power deployment in the case of Europe, while the investment in solar power
decreases. |
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DOI: | 10.48550/arxiv.1903.04768 |