Abstract for:Regulators Facing Renewable Targets: A Policy Analysis

Electricity market regulation is a complex task: markets include long lead times and feedbacks and stakeholders in the market such as companies, consumers and investors have different agendas. Moreover, the raising awareness of climate change encourages the increasing use of renewable energy resources, challenging the markets and complicating their regulation even more. Yet, having a well-functioning electricity market which provides reliable, affordable and sustainable electricity is crucial for economic development. 

We develop a stylized System Dynamics (SD) model that allows us to incorporate the feedback mechanisms and the behavioural policies while simulating an electricity market in transition towards having half of its electricity generated by renewable sources. We evaluate the effects of different regulatory decisions on the following market performance criteria: security of supply, affordability and sustainability. The results show that there are multiple ways to reach an environmental target in a market, resulting in different market behaviours in terms of blackout risk, price and pollution. Taking quick actions when facing renewable targets might increase the price paid by consumers while decreasing the pollution. On the other hand, delaying regulatory change might result in higher security of supply and lower price paid by consumers, but higher pollution.