The expansion of RES and the EU ETS - valuable addition or conflicting instruments?

The expansion of renewable energy sources (RES) is a core element used for mitigating carbon emissions in the power sector in many countries. Besides such national measures, the European Union Emission Trade System (EU ETS) limits the carbon emissions and aims at an efficient allocation of the carbon mitigation. This study analyzes the interaction between RES expansion and EU ETS uptake as well as the impact national RES targets have on the European power system. To investigate this question, a European power market model is deployed from which carbon prices are derived endogenously. Two future market scenarios for the year 2030 are developed to illustrate the interrelation between EU ETS and RES expansion. Overall findings indicate that national RES targets and EU ETS are no conflicting instruments but the former increases the total system costs by 13% without reducing carbon emissions. Carbon prices increase in the model from 6 EUR/t in 2017 to 26-37 EUR/t in 2030. This and the coal phase-out lead to higher power prices which increase the economic feasibility of RES. In consequence, support costs for RES decrease in most countries. National targets strongly affect the economic feasibility of RES.

Automated summary

This study examines the interaction between the expansion of renewable energy sources and the European Union Emission Trade System, as well as the impact of national renewable energy targets on the European power system. The findings suggest that national targets can increase total system costs without reducing carbon emissions, but they can also improve the economic feasibility of renewable energy sources.