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The present market regulations make it extremely risky to invest in green energy, and this is impeding the fight against climate change. This is what Oscar Kraan (LU) writes in his dissertation. The PhD defence was on 25 April.
Kraan's research shows that there is a lack of certainty about how the green electricity market will develop, and that this may deter potential future investors. This mainly has to do with the nature of green energy: whereas you can switch a coal-fired power station on and off, solar and wind energy are dependent on the elements. Not only this, there is a complex dynamics between such fluctuating energy sources as sun and wind, and the need to store excess green energy for future use.
‘That means that in a sustainable energy system the price of electricity will also fluctuate significantly,' Kraan says. 'On days when it is overcast and there is no wind the price of electricity will be very high and on sunny and windy days it will be very low. In a completely liberalised market the price of electricity can range from zero to some infinite amount. It's logical that investors have difficulty estimating whether they will recoup their investment if they build a wind park, for example.’
Another contributing factor is that electricity suppliers in the Netherlands are paid for the amount of electricity they actually supply to households and businesses. If we want to move to a completely CO2-neutral system, we can probably learn a lot from our neighbours, Kraan says. 'In Germany suppliers can also be paid for the electricity that they are able to supply at any one point in time, that is for the capacity they have available. That removes some of the uncertainty.'
For his research Kraan made use of agent-based modelling, a research method in which he simulated the behaviour of different players. That behaviour is based not only on maximising profit, as old-style economists often assume, but also on moral considerations, such as making the supply of energy greener. All these behaviours by individual players ultimately result in one common outcome. In the same way that a lot of individual cars can contribute to a traffic jam, the behaviour of individual consumers can have an influence on the climate problem.
Kraan looked not only at renewable electricity, but also at fuels. This could be the bottleneck in the global move towards sustainability because there are currently no clean alternatives for kerosine for planes and diesel for lorries. Kraan: ‘We could impose government measures to force businesses and consumers to compensate for the emissions, for example by getting them to store CO2 underground. But if you take the alternative route and focus your hopes on technology to solve the climate problem, synthetic, CO2-neutral fuels could be a solution, although for that to work the technology needs to be developed further.'
Kraan's PhD research was financed and largely implemented by Shell. 'My research is interesting for Shell's scenario team. They base their reports in general on historic developments, but energy transition means that past models no longer always apply. It then becomes worthwhile looking at the combined activities of different players, as I have done. And it's not only Shell that benefits from my research: all the articles and models are open access so everyone can look at them.'