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The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany

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  • Sensfuß, Frank
  • Ragwitz, Mario
  • Genoese, Massimo
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    Abstract

    The German feed-in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies. Critics state that the costs for consumers are too high. An important aspect to be considered in the discussion is the price effect created by renewable electricity generation. This paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in Germany. The central aspect to be analysed is the impact of renewable electricity generation on spot market prices. The results generated by an agent-based simulation platform indicate that the financial volume of the price reduction is considerable. In the short run, this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits. In the case of the year 2006, the volume of the merit-order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers.

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    File URL: http://www.sciencedirect.com/science/article/B6V2W-4SP4B3D-1/1/179bdad0f885fb5d9f5e3a1d3d4c3c79
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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 8 (August)
    Pages: 3076-3084

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:8:p:3076-3084

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    Web page: http://www.elsevier.com/locate/enpol

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    1. Wustenhagen, Rolf & Bilharz, Michael, 2006. "Green energy market development in Germany: effective public policy and emerging customer demand," Energy Policy, Elsevier, vol. 34(13), pages 1681-1696, September.
    2. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    3. Wissen, Ralf & Nicolosi, Marco, 2007. "Anmerkungen zur aktuellen Diskussion zum Merit-Order Effekt der erneuerbaren Energien," EWI Working Papers 2007-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
    4. Bode, Sven, 2006. "On the impact of renewable energy support schemes on power prices," HWWI Research Papers 4-7, Hamburg Institute of International Economics (HWWI).
    5. 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.
    6. Bode, Sven & Groscurth, Helmuth-Michael, 2006. "Zur Wirkung des EEG auf den "Strompreis"," HWWA Discussion Papers 348, Hamburg Institute of International Economics (HWWA).
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    1. Merit order in Wikipedia (English)
    2. نظام الجدارة in Wikipedia (Arabic)

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