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Faculty of Economics

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Newbery, D.

High renewable electricity penetration: marginal curtailment and market failure under “subsidy-free” entry


Abstract: Ambitious plans to decarbonise electricity will require high levels of variable renewable electricity (VRE). At high VRE penetration, the surplus that cannot be exported must be curtailed (spilled). The last MW of wind capacity will be curtailed 3+ time more hours than the average, but even in efficiently designed markets, price signals for VRE 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 an analytical model calibrated to Ireland in 2026, showing the source of this distortion and estimates of its magnitude.

Keywords: renewable electricity, marginal wind curtailment, integration costs, market failures, inertia charges

JEL Codes: H23 L94 Q28 Q42 Q48

Author links: David Newbery  


EPRG Paper Link: 2319

Open Access Link: