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

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  • Janina Ketterer

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. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  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, 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, Hamburg Institute of International Economics (HWWA) 348, Hamburg Institute of International Economics (HWWA).
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Cited by:
  1. Thomas Triebs & Subal C. Kumbhakar, 2012. "Productivity with General Indices ofManagement and Technical Change," Ifo Working Paper Series, Ifo Institute for Economic Research at the University of Munich Ifo Working Paper No. 144, Ifo Institute for Economic Research at the University of Munich.
  2. Grossi, Luigi & Heim, Sven & Waterson, Michael, 2014. "A vision of the European energy future? The impact of the German response to the Fukushima earthquake," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 14-051, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. 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), University of Warwick, Department of Economics 1047, University of Warwick, Department of Economics.
  4. Grothe, Oliver & Müsgens, Felix, 2013. "The influence of spatial effects on wind power revenues under direct marketing rules," Energy Policy, Elsevier, Elsevier, vol. 58(C), pages 237-247.
  5. Grossi, Luigi & Waterson, Michael, 2013. "German Energy Market Fallout from the Japanese Earthquake," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 157, Competitive Advantage in the Global Economy (CAGE).
  6. Simon Hagemann, 2013. "Price Determinants in the German Intraday Market for Electricity: An Empirical Analysis," EWL Working Papers, University of Duisburg-Essen, Chair for Management Science and Energy Economics 1318, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2013.

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