  This paper analyses the interaction between centralised carbon emissive
technologies and distributed intermittent non-emissive technologies. In our
model, there is a representative consumer who can satisfy her electricity
demand by investing in distributed generation (solar panels) and by buying
power from a centralised firm at a price the firm sets. Distributed generation
is intermittent and induces an externality cost to the consumer. The firm
provides non-random electricity generation subject to a carbon tax and to
transmission costs. The objective of the consumer is to satisfy her demand
while mini\-mising investment costs, payments to the firm and intermittency
costs. The objective of the firm is to satisfy the consumer's residual demand
while minimising investment costs, demand deviation costs, and maximising the
payments from the consumer. We formulate the investment decisions as
McKean-Vlasov control problems with stochastic coefficients. We provide
explicit, price model-free solutions to the optimal decision problems faced by
each player, the solution of the Pareto optimum, and the Stackelberg
equilibrium where the firm is the leader. We find that, from the social
planner's point of view, the carbon tax or transmission costs are necessary to
justify a positive share of distributed capacity in the long-term, whatever the
respective investment costs of both technologies are. The Stackelberg
equilibrium is far from the Pareto equilibrium and leads to an over-investment
in distributed energy and to a much higher price for centralised energy.
