Abstract:
“Plugging in the Wind and Sun: Cost Externalities in the Grid Integration of Renewable Energy”
Gautam Gowrisankaran (Columbia University), Ashley Langer (University of Arizona), and Nicholas Ryan* (Yale University)
The past decade has seen a surge in new renewable power plants seeking to connect to the electric grid. New potential plants enter an interconnection queue to learn their costs of connection. Plant entry to the queue causes cost externalities, whereby each entrant plant can change the costs that other nearby plants must pay to connect. We study the interconnection queue that admits new plants to the California electricity market. We find evidence that cost externalities matter for investment. Plant interconnection costs are higher when more other plants are seeking to connect nearby. Plants are more likely to connect to the grid when their costs of interconnection are low or when they are given free access to the spare capacity of the grid. In ongoing work, we model how policies to auction off spare grid capacity would change queue congestion and renewable energy investment.
*Denotes presenter