Incentivizing the investment needed to meet the government’s offshore wind target of 40 GW by 2030 will require an understanding of how electricity market design and policies shape the risks associated with wind assets, and how the heterogeneous investors in wind assets respond to such risks. Going forward, it will not be enough to simply protect wind investors from ‘merchant risk’ in the wholesale market, since the ability to respond to market signals will be important for effectively integrating wind power into the energy system.
Our project will address the pressing question – what is the most effective way of incentivizing investment, while rewarding the flexibility to match supply and demand? Our novel, data-driven approach will first learn lessons from history, modelling the investment behaviour of different classes of investor. We will then project our empirical findings into the future to test different market design scenarios.
The project involves a team from University College London, with expertise in climate finance and the University of Strathclyde, with expertise in energy system modelling. They will engage with key stakeholders throughout the project with the goal of providing pragmatic policy advice for the UK government, financial insights for industry stakeholders, and advancing the knowledge of the research community.