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What Moves the Ex Post Variable Profit of Natural-Gas-Fired Generation in California?

Author

Listed:
  • Chi-Keung Woo
  • Ira Horowitz
  • Jay Zarnikau
  • Jack Moore
  • Brendan Schneiderman
  • Tony Ho
  • Eric Leung

Abstract

We use a large California database of over 32,000 hourly observations in the 45-month period of April 2010 through December 2013 to document the ex post variable profit effects of multiple fundamental drivers on natural-gas-fired electricity generation. These drivers are the natural-gas price, system loads, nuclear capacities available, hydro conditions, and renewable generation. We find that profits are reduced by increases in generation from nuclear plants and wind farms, and are increased by increases in the natural-gas price and loads. Solar generation has a statistically insignificant effect, although this will likely change as solar energy increases its generation share in California’s electricity market. Our findings support California’s adopted resource adequacy program under which the state’s load-serving entities may sign long-term bilateral contracts with generation developers to provide sufficient revenues to enable construction of new natural-gas-fired generation plants.

Suggested Citation

  • Chi-Keung Woo & Ira Horowitz & Jay Zarnikau & Jack Moore & Brendan Schneiderman & Tony Ho & Eric Leung, 2016. "What Moves the Ex Post Variable Profit of Natural-Gas-Fired Generation in California?," The Energy Journal, , vol. 37(3), pages 29-57, July.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:3:p:29-57
    DOI: 10.5547/01956574.37.3.cwoo
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    1. Milstein, I. & Tishler, A. & Woo, C.K., 2024. "The effect of PV generation's hourly variations on Israel's solar investment," Energy Economics, Elsevier, vol. 136(C).

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