The impact of wind power support schemes on technology choices

- System-friendly wind turbines produce power more reliably and at higher value.
- Investors' wind power investment behavior is modeled.
- Floating market premia rely on sufficient foresight or large price risk exposure.
- A new policy is suggested that aligns privately and publicly-optimal deployment.

In energy systems with large shares of variable renewable energies, electricity generation is lower during unfavorable weather conditions. System-friendly wind turbines (SFTs) rectify this by producing a larger share of their electricity at low wind speeds. This paper analyzes to what extent SFTs' benefits out-weigh their additional costs and how to incentivize investments into them. Using a wind power investment model for Germany, I show that SFTs indeed deliver benefits for the energy system that over-compensate for their cost premium. Floating market premium schemes incentivize their deployment only where investors bear significant price risks and possess sufficient foresight. Alternatively, a new production value-based benchmark triggers investors to install SFTs that meet the requirements of power systems with increasing shares of variable renewable energies.