Incentivizing Flexible Operation of Bioenergy Power Plants – Subsidies, Markets, or Both?

The increasing share of intermittent renewable energy sources supports the decarbonization of energy systems worldwide. Simultaneously, the fluctuating infeed from wind and solar photovoltaics leads to challenges, such as increased flexibility requirements. Bioenergy, a CO2-neutral and dispatchable energy source, may contribute to the provision of flexibility. However, recent European and national regulations focus on reducing barriers to bioenergy and costs but not on promoting flexible operation of bioenergy plants. With carbon prices reaching all-time highs in Europe and remaining at unprecedented levels despite the crisis following the Russian attack on Ukraine, a key question arises: Should flexible operation of bioenergy power plants be incentivized through subsidies or carbon pricing or both? This question is addressed by studying the system effects of more flexible operation of bioenergy plants by using and extending an existing energy system model covering Europe. The results show that both higher CO2 prices and a specific bonus for flexible operation make flexible operation more profitable. Both instruments have merits owing to their overall positive system effects. We suggest striving for higher CO2 prices but using a specific bonus to provide an additional initial incentive to switch from inflexible to flexible operation