IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v114y2018icp153-164.html
   My bibliography  Save this article

Analysing the impact of renewable energy regulation on retail electricity prices

Author

Listed:
  • Trujillo-Baute, Elisa
  • del Río, Pablo
  • Mir-Artigues, Pere

Abstract

Retail electricity prices have substantially increased in the last decade in the European Union (EU) as a result of different regulations, raising the concern of policy makers. The growth in the support costs for electricity from renewable energy sources (RES-E) has often been singled out as a main driver of the increase in these prices. The aim of this paper is to analyse the degree of influence of RES-E promotion costs on the evolution of the retail price of electricity in the EU Member States. The analysis is carried out for households as well as for industry, with the help of a panel data econometric model. Our results show that the impact of renewable energy promotion costs on retail electricity prices is positive and statistically significant, although relatively small. Differences across consumer types can be observed. An increase of 1% in those costs induces an average increase of only 0.023% in industrial retail prices and 0.008% in the residential retail prices. This impact on retail prices is mediated by the type of support scheme which is adopted, with price-based support instruments showing a greater effect than quantity-based ones.

Suggested Citation

  • Trujillo-Baute, Elisa & del Río, Pablo & Mir-Artigues, Pere, 2018. "Analysing the impact of renewable energy regulation on retail electricity prices," Energy Policy, Elsevier, vol. 114(C), pages 153-164.
    • Handle: RePEc:eee:enepol:v:114:y:2018:i:c:p:153-164
    DOI: 10.1016/j.enpol.2017.11.042
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421517307887
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2017.11.042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.
    2. John Cubbin & Jon Stern, 2006. "The Impact of Regulatory Governance and Privatization on Electricity Industry Generation Capacity in Developing Economies," The World Bank Economic Review, World Bank, vol. 20(1), pages 115-141.
    3. Pere Mir-Artigues & Pablo del Río, 2014. "Combining tariffs, investment subsidies and soft loans in a renewable electricity deployment policy," Working Papers 2014/23, Institut d'Economia de Barcelona (IEB).
    4. Paul Deane, John FitzGerald, Laura Malaguzzi Valeri, Aidan Tuohy and Darragh Walsh, 2015. "Irish and British electricity prices: what recent history implies for future prices," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    5. Gelabert, Liliana & Labandeira, Xavier & Linares, Pedro, 2011. "An ex-post analysis of the effect of renewables and cogeneration on Spanish electricity prices," Energy Economics, Elsevier, vol. 33(S1), pages 59-65.
    6. Michael Smith & Johannes Urpelainen, 2014. "The Effect of Feed-in Tariffs on Renewable Electricity Generation: An Instrumental Variables Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 367-392, March.
    7. del Río, Pablo & Mir-Artigues, Pere, 2014. "Combinations of support instruments for renewable electricity in Europe: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 287-295.
    8. del Río, Pablo & Linares, Pedro, 2014. "Back to the future? Rethinking auctions for renewable electricity support," Renewable and Sustainable Energy Reviews, Elsevier, vol. 35(C), pages 42-56.
    9. Moreno, Blanca & López, Ana J. & García-Álvarez, María Teresa, 2012. "The electricity prices in the European Union. The role of renewable energies and regulatory electric market reforms," Energy, Elsevier, vol. 48(1), pages 307-313.
    10. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.
    11. Michael G. Pollitt, 2009. "Electricity Liberalisation in the European Union: A Progress Report," Working Papers EPRG 0929, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    12. Costa-Campi, Maria Teresa & Trujillo-Baute, Elisa, 2015. "Retail price effects of feed-in tariff regulation," Energy Economics, Elsevier, vol. 51(C), pages 157-165.
    13. Rathmann, M., 2007. "Do support systems for RES-E reduce EU-ETS-driven electricity prices?," Energy Policy, Elsevier, vol. 35(1), pages 342-349, January.
    14. Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2010. "Economic impacts from the promotion of renewable energy technologies: The German experience," Energy Policy, Elsevier, vol. 38(8), pages 4048-4056, August.
    15. Cludius, Johanna & Forrest, Sam & MacGill, Iain, 2014. "Distributional effects of the Australian Renewable Energy Target (RET) through wholesale and retail electricity price impacts," Energy Policy, Elsevier, vol. 71(C), pages 40-51.
    16. Sáenz de Miera, Gonzalo & del Ri­o González, Pablo & Vizcaino, Ignacio, 2008. "Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain," Energy Policy, Elsevier, vol. 36(9), pages 3345-3359, September.
    17. Chisari, Omar & Estache, Antonio & Romero, Carlos, 1999. "Winners and Losers from the Privatization and Regulation of Utilities: Lessons from a General Equilibrium Model of Argentina," The World Bank Economic Review, World Bank, vol. 13(2), pages 357-378, May.
    18. Mir-Artigues, Pere & del Río, Pablo, 2014. "Combining tariffs, investment subsidies and soft loans in a renewable electricity deployment policy," Energy Policy, Elsevier, vol. 69(C), pages 430-442.
    19. Dong, C.G., 2012. "Feed-in tariff vs. renewable portfolio standard: An empirical test of their relative effectiveness in promoting wind capacity development," Energy Policy, Elsevier, vol. 42(C), pages 476-485.
    20. Thure Traber & Claudia Kemfert, 2009. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions, and Firms," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 155-178.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grafström, Jonas, 2023. "Spark of Transformation: The Impact of Electricity Prices on Europe's Industrial Landscape – Introducing the Green Industrial Location Attractiveness Index (GILAI)," Ratio Working Papers 369, The Ratio Institute.
    2. Baxter Williams & Daniel Bishop & Patricio Gallardo & J. Geoffrey Chase, 2023. "Demand Side Management in Industrial, Commercial, and Residential Sectors: A Review of Constraints and Considerations," Energies, MDPI, vol. 16(13), pages 1-28, July.
    3. José Miguel Paredes-Parra & Antonio Mateo-Aroca & Guillermo Silvente-Niñirola & María C. Bueso & Ángel Molina-García, 2018. "PV Module Monitoring System Based on Low-Cost Solutions: Wireless Raspberry Application and Assessment," Energies, MDPI, vol. 11(11), pages 1-20, November.
    4. Sheybanivaziri, Samaneh & Le Dréau, Jérôme & Kazmi, Hussain, 2024. "Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead," Discussion Papers 2024/1, Norwegian School of Economics, Department of Business and Management Science.
    5. Sergio Coronas & Jordi de la Hoz & Àlex Alonso & Helena Martín, 2022. "23 Years of Development of the Solar Power Generation Sector in Spain: A Comprehensive Review of the Period 1998–2020 from a Regulatory Perspective," Energies, MDPI, vol. 15(4), pages 1-53, February.
    6. Karimu, Amin & Bali Swain, Ranjula, 2023. "Implication of electricity taxes and levies on sustainable development goals in the European Union," Energy Policy, Elsevier, vol. 177(C).
    7. Oosthuizen, Anna Maria & Inglesi-Lotz, Roula & Thopil, George Alex, 2022. "The relationship between renewable energy and retail electricity prices: Panel evidence from OECD countries," Energy, Elsevier, vol. 238(PB).
    8. Neeraj Kumar & Madan Mohan Tripathi & Saket Gupta & Majed A. Alotaibi & Hasmat Malik & Asyraf Afthanorhan, 2023. "Study of Potential Impact of Wind Energy on Electricity Price Using Regression Techniques," Sustainability, MDPI, vol. 15(19), pages 1-17, October.
    9. Wang, Shurui & Huang, Ye & Vorushylo, Inna & Chen, Haisheng & McLarnon, Dominic & MacArtain, Paul & Hewitt, Neil, 2020. "Economic assessment of high renewable energy penetration scenario in 2030 on the interconnected Irish power system," Energy Policy, Elsevier, vol. 145(C).
    10. Wang, Ge & Zhang, Qi & Li, Yan & Mclellan, Benjamin C., 2019. "Efficient and equitable allocation of renewable portfolio standards targets among China's provinces," Energy Policy, Elsevier, vol. 125(C), pages 170-180.
    11. Favero, Filippo & Grossi, Luigi, 2023. "Analysis of individual natural gas consumption and price elasticity: Evidence from billing data in Italy," Energy Economics, Elsevier, vol. 118(C).
    12. Ru Sha & Tao Ge & Jinye Li, 2022. "How Energy Price Distortions Affect China’s Economic Growth and Carbon Emissions," Sustainability, MDPI, vol. 14(12), pages 1-27, June.
    13. Castro Pérez, José E. & Flores, Daniel, 2023. "The effect of retail price regulation on the wholesale price of electricity," Energy Policy, Elsevier, vol. 173(C).
    14. Rezana Balla, 2020. "Digitalization of Financial Services in Albania Under Restricted Measures Covid-19," European Journal of Marketing and Economics Articles, Revistia Research and Publishing, vol. 3, July -Dec.
    15. Carmen Ramos Carvajal & Ana Salomé García-Muñiz & Blanca Moreno Cuartas, 2019. "Assessing Socioeconomic Impacts of Integrating Distributed Energy Resources in Electricity Markets through Input-Output Models," Energies, MDPI, vol. 12(23), pages 1-21, November.
    16. Raquel Fernández-González & Andrés Suárez-García & Miguel Ángel Álvarez Feijoo & Elena Arce & Montserrat Díez-Mediavilla, 2020. "Spanish Photovoltaic Solar Energy: Institutional Change, Financial Effects, and the Business Sector," Sustainability, MDPI, vol. 12(5), pages 1-18, March.
    17. Hannesson, Rögnvaldur, 2019. "How much do European households pay for green energy?," Energy Policy, Elsevier, vol. 131(C), pages 235-239.
    18. Donglan Liu & Xin Liu & Kun Guo & Qiang Ji & Yingxian Chang, 2023. "Spillover Effects among Electricity Prices, Traditional Energy Prices and Carbon Market under Climate Risk," IJERPH, MDPI, vol. 20(2), pages 1-18, January.
    19. John Dorrell & Keunjae Lee, 2021. "The Price of Wind: An Empirical Analysis of the Relationship between Wind Energy and Electricity Price across the Residential, Commercial, and Industrial Sectors," Energies, MDPI, vol. 14(12), pages 1-21, June.
    20. López Prol, Javier & Steininger, Karl W., 2020. "Photovoltaic self-consumption is now profitable in Spain: Effects of the new regulation on prosumers’ internal rate of return," Energy Policy, Elsevier, vol. 146(C).
    21. Winter, Simon & Schlesewsky, Lisa, 2019. "The German feed-in tariff revisited - an empirical investigation on its distributional effects," Energy Policy, Elsevier, vol. 132(C), pages 344-356.
    22. Yasir Alsaedi & Gurudeo Anand Tularam & Victor Wong, 2021. "Impact of the Nature of Energy Management and Responses to Policies Regarding Solar and Wind Pricing: A Qualitative Study of the Australian Electricity Markets," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 191-205.
    23. Böhringer, Christoph & García-Muros, Xaquín & González-Eguino, Mikel, 2022. "Who bears the burden of greening electricity?," Energy Economics, Elsevier, vol. 105(C).
    24. Wang, Pengyu & Fang, Debin & Wang, Shuyi, 2022. "Optimal dynamic regulation in retail electricity market with consumer feedback and social learning," Energy Policy, Elsevier, vol. 168(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ortega-Izquierdo, Margarita & del Río, Pablo, 2016. "Benefits and costs of renewable electricity in Europe," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 372-383.
    2. Gürtler, Marc & Paulsen, Thomas, 2018. "The effect of wind and solar power forecasts on day-ahead and intraday electricity prices in Germany," Energy Economics, Elsevier, vol. 75(C), pages 150-162.
    3. Marc Baudry & Clément Bonnet, 2016. "Demand pull isntruments and the development of wind power in Europe: A counter-factual analysis," Working Papers 1607, Chaire Economie du climat.
    4. Costa-Campi, Maria Teresa & Trujillo-Baute, Elisa, 2015. "Retail price effects of feed-in tariff regulation," Energy Economics, Elsevier, vol. 51(C), pages 157-165.
    5. Costa-Campi, Maria Teresa & Trujillo-Baute, Elisa, 2015. "Retail price effects of feed-in tariff regulation," Energy Economics, Elsevier, vol. 51(C), pages 157-165.
    6. Bogdan Klepacki & Barbara Kusto & Piotr Bórawski & Aneta Bełdycka-Bórawska & Konrad Michalski & Aleksandra Perkowska & Tomasz Rokicki, 2021. "Investments in Renewable Energy Sources in Basic Units of Local Government in Rural Areas," Energies, MDPI, vol. 14(11), pages 1-17, May.
    7. Oosthuizen, Anna Maria & Inglesi-Lotz, Roula & Thopil, George Alex, 2022. "The relationship between renewable energy and retail electricity prices: Panel evidence from OECD countries," Energy, Elsevier, vol. 238(PB).
    8. Bell, William Paul & Wild, Phillip & Foster, John & Hewson, Michael, 2017. "Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia," Energy Economics, Elsevier, vol. 67(C), pages 224-241.
    9. Adom, Philip Kofi & Insaidoo, Michael & Minlah, Michael Kaku & Abdallah, Abdul-Mumuni, 2017. "Does renewable energy concentration increase the variance/uncertainty in electricity prices in Africa?," Renewable Energy, Elsevier, vol. 107(C), pages 81-100.
    10. Marc Baudry & Clément Bonnet, 2019. "Demand-Pull Instruments and the Development of Wind Power in Europe: A Counterfactual Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 385-429, June.
    11. López Prol, Javier, 2018. "Regulation, profitability and diffusion of photovoltaic grid-connected systems: A comparative analysis of Germany and Spain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 1170-1181.
    12. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da, 2019. "The “Merit-order effect” of wind and solar power: Volatility and determinants," Renewable and Sustainable Energy Reviews, Elsevier, vol. 102(C), pages 54-62.
    13. Vicki Duscha & Pablo del Río, 2017. "An economic analysis of the interactions between renewable support and other climate and energy policies," Energy & Environment, , vol. 28(1-2), pages 11-33, March.
    14. Cludius, Johanna & Hermann, Hauke & Matthes, Felix Chr. & Graichen, Verena, 2014. "The merit order effect of wind and photovoltaic electricity generation in Germany 2008–2016: Estimation and distributional implications," Energy Economics, Elsevier, vol. 44(C), pages 302-313.
    15. Sébastien Phan & Fabien Roques, 2015. "Is the depressive effect of renewables on power prices contagious? A cross border econometric analysis," Cambridge Working Papers in Economics 1527, Faculty of Economics, University of Cambridge.
    16. Csereklyei, Zsuzsanna & Qu, Songze & Ancev, Tihomir, 2019. "The effect of wind and solar power generation on wholesale electricity prices in Australia," Energy Policy, Elsevier, vol. 131(C), pages 358-369.
    17. Thao Pham & Killian Lemoine, 2020. "Impacts of subsidized renewable electricity generation on spot market prices in Germany : Evidence from a GARCH model with panel data," Working Papers hal-02568268, HAL.
    18. Kaller, Alexander & Bielen, Samantha & Marneffe, Wim, 2018. "The impact of regulatory quality and corruption on residential electricity prices in the context of electricity market reforms," Energy Policy, Elsevier, vol. 123(C), pages 514-524.
    19. Gottschamer, L. & Zhang, Q., 2016. "Interactions of factors impacting implementation and sustainability of renewable energy sourced electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 164-174.
    20. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.

    More about this item

    Keywords

    Electricity prices; Renewable energy; Public support; Feed-in tariffs; Quotas;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:114:y:2018:i:c:p:153-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.