Policy instruments with fixed and variable components and how they influence investments in wholesale electricity markets

The mathematical model peak-load pricing is used to predict the electricity market's invested capacity for each of the traditional production technologies.

In this project we will develop this method further, so that it can also consider renewables with intermittent output and demand-response technologies.

Moreover, we will generalize the method, so that it can consider policy instruments, such as taxes, network tariffs, capaciy mechanisms and support systems, with both variable and fixed components.

Hence, we will consider policy instruments where one part is proportional to the energy produced in a plant and another part that is proportional to the production capacity of the plant. We will compare outcomes for different designs of the policy instruments. A qualitative discussion will be added.

We will conclude what is most efficient for the society. Our objective is to come up with robust policies that are suitable for a sustainable energy transition.