PUBLICATION - The insurance value of renewable energies
Thibault Deletombe, Patrice Geoffron and Hyun Jin Julie YU investigate in this new study how renewable energies can be used to hedge future energy shocks.
This paper found its original inspiration in the aftermath of the 2022 energy crisis, in a context where Europe had to urgently replace a substantial share of its energy supply. At the time, RePowerEU put solar and wind at the center of the European strategy to reduce gas imports.
However, this paper found a renewed interest in the recent months. Indeed, while France is debating its next multi-year energy plan, the EU pledges to buy increasing amounts of US gas.
It is no secret that France is currently facing severe fiscal constraints and efficient public spending is more critical than ever to ensure simultaneously energy supply security and decarbonization.
In this paper, the authors propose a framework based on social choice theory to examine some normative aspects related to capacity payments in the power system when facing two market failures, namely missing markets and imperfect information.
Then, they test this framework using real-world data. They provide a quantitative assessment of the protection solar and wind offer against gas shocks using a forward looking model of the French power system in 2030.
The results show that solar and wind have a positive insurance value against gas shocks. They are effective hedging tools for the French power system against future energy crises.
In addition to the environmental benefits, this work suggests that there are additional incentives to support renewable development.
This work is part of Thibault Deletombe Ph.D. thesis, which was funded by and conducted at CEA I-Tésé.