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Toward Sustainable Electricity Markets: Merit-Order Dynamics on Photovoltaic Energy Price Duck Curve and Emissions Displacement

Author

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  • Gloria Durán-Castillo

    (Department of Mechanical Engineering, Faculty of Engineering, University of Alberta, Edmonton, AB T6G 2E1, Canada)

  • Tim Weis

    (Department of Mechanical Engineering, Faculty of Engineering, University of Alberta, Edmonton, AB T6G 2E1, Canada)

  • Andrew Leach

    (Department of Economics, Faculty of Law, University of Alberta, Edmonton, AB T6G 2H4, Canada)

  • Brian A. Fleck

    (Department of Mechanical Engineering, Faculty of Engineering, University of Alberta, Edmonton, AB T6G 2E1, Canada)

Abstract

This paper examines how the slope of the merit-order curve and the share of non-zero-dollar dispatched energy affect photovoltaic (PV) price cannibalization and the declining market value of all generation types. Using historical merit-order data from Alberta, Canada—during its coal-to-gas transition—we simulated the introduction of zero-marginal-cost PV offers. The increased PV penetration rapidly suppresses midday electricity prices, forming a “duck curve” that challenges solar project economics. Emission reductions improve with rising carbon prices, indicating environmental benefits despite declining market revenues. Years with steeper merit-order slopes and lower non-zero-dollar dispatch shares show intensified price cannibalization and a reduced PV market value. The integration of battery storage alongside PV significantly flattened daily price profiles—raising the trough prices during charging and lowering the highest prices during discharging. While this reduces price volatility, it also diminishes the market value of all generation types, as batteries discharge at zero marginal cost during high-price hours. Battery arbitrage remains limited in low- and moderate-price regimes but becomes more profitable under high-price regimes. Overall, these dynamics underscore the challenges of integrating large-scale PV in energy-only markets, where price cannibalization erodes long-term investment signals for clean energy technologies. These insights inform sustainable energy policy design aimed at supporting decarbonization, and investment viability in liberalized electricity markets.

Suggested Citation

  • Gloria Durán-Castillo & Tim Weis & Andrew Leach & Brian A. Fleck, 2025. "Toward Sustainable Electricity Markets: Merit-Order Dynamics on Photovoltaic Energy Price Duck Curve and Emissions Displacement," Sustainability, MDPI, vol. 17(10), pages 1-28, May.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:10:p:4618-:d:1658446
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    References listed on IDEAS

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