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Renewable Generation and Electricity Prices: Taking Stock and New Evidence for Germany and Austria

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  • Klaas WŸrzburg

    (Economics for Energy and Rede (Universidade de Vigo))

  • Xavier Labandeira

    (Economics for Energy and Rede (Universidade de Vigo))

  • Pedro Linares

    (Economics for Energy and Universidad Pontificia de Comillas (Madrid, Spain))

Abstract

Economic theory predicts that high renewable electricity production reduces the price of electricity, also referred to as the 'merit-order efecto'. Although the merit-order effect is only one of several consequences of renewable production on the electricity system, it is crucial to determine its size for the economic evaluation of renewable energies. In this paper we present a comprehensive overview of relevant past research results on the price effect of renewables. Additionally, we conduct a new empirical analysis of the price effect of renewable production for the Austrian-German region, a market that clearly qualifies for a merit-order effect analysis given its characteristics. Based on the review and our own analysis, we show that the merit-order effect varies depending on the region and the assessment method chosen. We also find that the size of this effect is less dispersed throughout different markets than previously suggested by the literature.

Suggested Citation

  • Klaas WŸrzburg & Xavier Labandeira & Pedro Linares, 2013. "Renewable Generation and Electricity Prices: Taking Stock and New Evidence for Germany and Austria," Working Papers fa03-2013, Economics for Energy.
  • Handle: RePEc:efe:wpaper:fa03-2013
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    References listed on IDEAS

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    More about this item

    Keywords

    Wind; solar; merit-order; supply;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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