The Economic and Climate Value of Flexibility in Green Energy Markets

Abstract This paper examines how enhanced flexibility across space, time, and a regulatory dimension affects the economic costs CO $$_2$$ 2 emissions of integrating large shares intermittent renewable energy from wind solar. We develop numerical model which resolves hourly dispatch investment choices among heterogeneous technologies natural resources in interconnected wholesale electricity markets, cross-country trade (spatial flexibility), storage (temporal tradable green quotas (regulatory flexibility). Taking to data for case Europe’s system we find that appropriate combination can bring about substantial gains efficiency, reduce (up 13.8%) lower 51.2%). Regulatory is necessary realize most maximum possible benefits. also increased are unevenly distributed some countries incur welfare losses.