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The merit order effect of Czech renewable energy

Author

Listed:
  • Petra Lunackova
  • Jan Prusa
  • Karel Janda

Abstract

We assess the impact of photovoltaic power plants and other renewable sources on the electricity supply curve in the Czech Republic. The merit order effect is estimated as the elasticity of electricity spot price with respect to change in supply of electricity from renewable sources. Data for the Czech electricity spot market from 2010 to 2015 are analyzed as this is the period with the steepest increase in a renewable generation capacity. The effect is estimated separately for solar and other renewable sources. We find a significant difference between these two groups. Our results show that based on hourly, daily and weekly data energy produced by Czech solar power plants does not decrease electricity spot price, creating double cost to the end consumer. However, the merit order effect based on averaged daily and weekly data is shown to exist for other renewable sources excluding solar (mainly water and wind). This contributes to the conclusion that the Czech renewables policy that prefers solar to other renewable sources may be considered as suboptimal.

Suggested Citation

  • Petra Lunackova & Jan Prusa & Karel Janda, 2017. "The merit order effect of Czech renewable energy," CAMA Working Papers 2017-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-17
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-03/17_2017_lunackova_prusa_janda.pdf
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    Citations

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    Cited by:

    1. Prata, Ricardo & Carvalho, Pedro M.S. & Azevedo, Inês L., 2018. "Distributional costs of wind energy production in Portugal under the liberalized Iberian market regime," Energy Policy, Elsevier, vol. 113(C), pages 500-512.
    2. Kolb, Sebastian & Dillig, Marius & Plankenbühler, Thomas & Karl, Jürgen, 2020. "The impact of renewables on electricity prices in Germany - An update for the years 2014–2018," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    3. Ishizaki, Takayuki & Koike, Masakazu & Yamaguchi, Nobuyuki & Ueda, Yuzuru & Imura, Jun-ichi, 2020. "Day-ahead energy market as adjustable robust optimization: Spatio-temporal pricing of dispatchable generators, storage batteries, and uncertain renewable resources," Energy Economics, Elsevier, vol. 91(C).
    4. Simshauser, Paul, 2020. "Merchant renewables and the valuation of peaking plant in energy-only markets," Energy Economics, Elsevier, vol. 91(C).
    5. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da, 2019. "The “Merit-order effect” of wind and solar power: Volatility and determinants," Renewable and Sustainable Energy Reviews, Elsevier, vol. 102(C), pages 54-62.
    6. Nibedita, Barsha & Irfan, Mohd, 2022. "Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market," Renewable Energy, Elsevier, vol. 194(C), pages 538-551.
    7. Janda, Karel & Málek, Jan & Rečka, Lukáš, 2017. "Influence of renewable energy sources on transmission networks in Central Europe," Energy Policy, Elsevier, vol. 108(C), pages 524-537.
    8. Macedo, Daniela Pereira & Marques, António Cardoso & Damette, Olivier, 2021. "The Merit-Order Effect on the Swedish bidding zone with the highest electricity flow in the Elspot market," Energy Economics, Elsevier, vol. 102(C).
    9. Panos, Evangelos & Densing, Martin, 2019. "The future developments of the electricity prices in view of the implementation of the Paris Agreements: Will the current trends prevail, or a reversal is ahead?," Energy Economics, Elsevier, vol. 84(C).
    10. Macedo, Daniela Pereira & Marques, António Cardoso & Damette, Olivier, 2022. "The role of electricity flows and renewable electricity production in the behaviour of electricity prices in Spain," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 885-900.
    11. Jain, Sourabh & Shrimali, Gireesh, 2022. "Impact of renewable electricity on utility finances: Assessing merit order effect for an Indian utility," Energy Policy, Elsevier, vol. 168(C).
    12. Karel Janda & Michaela Koscova, 2018. "Photovoltaics and the Slovak Electricity Market," Working Papers IES 2018/02, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2018.
    13. Macedo, Daniela Pereira & Marques, António Cardoso & Damette, Olivier, 2020. "The impact of the integration of renewable energy sources in the electricity price formation: is the Merit-Order Effect occurring in Portugal?," Utilities Policy, Elsevier, vol. 66(C).
    14. Acar, Berkan & Selcuk, Orhun & Dastan, Seyit Ali, 2019. "The merit order effect of wind and river type hydroelectricity generation on Turkish electricity prices," Energy Policy, Elsevier, vol. 132(C), pages 1298-1319.
    15. Ozan Korkmaz & Bihrat Önöz, 2022. "Modelling the Potential Impacts of Nuclear Energy and Renewables in the Turkish Energy System," Energies, MDPI, vol. 15(4), pages 1-25, February.
    16. Thomaßen, Georg & Redl, Christian & Bruckner, Thomas, 2022. "Will the energy-only market collapse? On market dynamics in low-carbon electricity systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 164(C).
    17. Jain, Sourabh & Jain, Nikunj Kumar, 2020. "Cost of electricity banking under open-access arrangement: A case of solar electricity in India," Renewable Energy, Elsevier, vol. 146(C), pages 776-788.
    18. Janda, Karel, 2018. "Slovak electricity market and the price merit order effect of photovoltaics," Energy Policy, Elsevier, vol. 122(C), pages 551-562.
    19. Csermely, Ágnes, 2022. "A naperőművek nagykereskedelmi piaci árakra és a hagyományos technológiákra gyakorolt hatása Magyarországon [The merit order effect of photovoltaic electricity generation in Hungary]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 547-571.
    20. Ondřej Filip & Karel Janda & Ladislav Krištoufek, 2018. "Ceny biopaliv a souvisejících komodit: analýza s použitím metod minimální kostry grafu a hierarchických stromů [Prices of Biofuels and Related Commodities: an Analysis Using Methods of Minimum Span," Politická ekonomie, Prague University of Economics and Business, vol. 2018(2), pages 218-239.
    21. Liebensteiner, Mario & Wrienz, Matthias, 2020. "Do Intermittent Renewables Threaten the Electricity Supply Security?," Energy Economics, Elsevier, vol. 87(C).

    More about this item

    Keywords

    energy subsidies; photovoltaic; renewables; merit order effect;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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