Ensuring long term investment for large scale solar power stations: Hedging instruments for green power

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Journal Article
Solar Energy, 2013, 98 (Part B), pp. 167 - 179
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There is a general consensus that solar power is one of the cleanest energy technologies available. Nevertheless, investment in large-scale Solar Power Generators (SPGs) is largely impeded by the intermittent nature of solar power. Since the electricity market has a critical responsibility to maintain the reliability of energy supply, the SPG can be registered only as the market semi-scheduled generator (AEMC, 2011). This option excludes the advantages of providing baseload supply, which in turn impedes efficient market contracting for SPGs. The existing approach relies on energy storage or co-generation facilities to be built at the same connection point as the SPG to compensate for output shortages when there is insufficient sunlight. The co-located facilities require significant additional investment in infrastructure. This paper proposes a market based financial approach that does not require an additional construction effort. The approach financially links solar or other intermittent power generation with a gas-fired station through a set of tailored swap-type instruments.
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