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Faculty of Economics

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Newbery, D.

Club goods and a tragedy of the commons: the Clean Energy Package and wind curtailment


Abstract: The EU’s Clean Energy Package is a club to collectively increase renewables and reduce CO2 emissions. At high levels of wind penetration, surplus wind that cannot be exported must be curtailed. Marginal curtailment is 3-4+ times the average curtailment, but even in an efficiently designed market, price signals for wind investment are given by average not marginal curtailment, creating a « tragedy of the commons » that requires a corrective charge to restore efficiency. The paper sets out a model calibrated to Ireland in 2026, showing the source of distortion, and derives new formulae for the capacity credit of wind, the learning subsidy and corrective charge needed to deliver the efficient level of renewables penetration, and estimates of their magnitude.

Keywords: Wind curtailment, market failures, corrective charges

JEL Codes: H23 L94 Q28 Q42 Q48

Author links: David Newbery  


EPRG Paper Link: 2036

Open Access Link: