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The Impact of Wind Power Generation on the Electricity Price in Germany

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  • Janina Ketterer

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Abstract

This paper provides insight into the relationship between intermittent wind powergeneration and electricity price behaviour in Germany. Using a GARCH model, theeffect of wind electricity in-feed on level and volatility of the electricity price can beevaluated in an integrated approach. The results show that variable wind power reducesthe price level but increases its volatility. With a low and volatile wholesale price, theprofitability of electricity plants, conventional or renewable, is more uncertain.Consequently, the construction of new plants is at risk, which has major implicationsfor the energy market and the security of supply. These challenges, related to theintegration of renewables, require adjustments to the regulatory and the policyframework of the electricity market. This paper’s results suggest that regulatory changeis able to stabilise the wholesale price. It is found that the electricity price volatility hasdecreased in Germany after the marketing mechanism of renewable electricity wasmodified. This gives confidence that further adjustments to regulation and policy mayfoster a better integration of renewables into the power system.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 143.

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Date of creation: 2012
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Handle: RePEc:ces:ifowps:_143

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  1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  2. Bierbrauer, Michael & Menn, Christian & Rachev, Svetlozar T. & Truck, Stefan, 2007. "Spot and derivative pricing in the EEX power market," Journal of Banking & Finance, Elsevier, vol. 31(11), pages 3462-3485, November.
  3. 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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Cited by:
  1. Grossi, Luigi & Heim, Sven & Waterson, Michael, 2014. "A vision of the European energy future? The impact of the German response to the Fukushima earthquake," The Warwick Economics Research Paper Series (TWERPS) 1047, University of Warwick, Department of Economics.
  2. repec:cge:warwcg:156 is not listed on IDEAS
  3. Grothe, Oliver & Müsgens, Felix, 2013. "The influence of spatial effects on wind power revenues under direct marketing rules," Energy Policy, Elsevier, vol. 58(C), pages 237-247.
  4. Simon Hagemann, 2013. "Price Determinants in the German Intraday Market for Electricity: An Empirical Analysis," EWL Working Papers 1318, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2013.
  5. Grossi, Luigi & Waterson, Michael, 2013. "German Energy Market Fallout from the Japanese Earthquake," CAGE Online Working Paper Series 157, Competitive Advantage in the Global Economy (CAGE).
  6. Triebs, T.P. & Kumbhakar, S.C., 2013. "Productivity with general indices of management and technical change," Economics Letters, Elsevier, vol. 120(1), pages 18-22.

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