We derive optimal subsidization of renewable energies in electricity markets. The analysis takes into account that capacity investment must be chosen under uncertainty about demand conditions and capacity availability, and that capacity as well as electricity generation may be sources of...

Due to the growing share of ”green” electricity generated by renewable energy technologies, the frequency of negative price spikes has substantially increased in Germany. To reduce such events, in 2012, a market premium scheme (MPS) was introduced as an alternative to feed-in tariffs for the...