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The long-Run Equilibrium Impact of Intermittent Renewables on Wholesale Electricity Prices

Author

Listed:
  • David Newbery

    (Faculty of Economics, Cambridge - EPRG Cambridge)

Abstract

High levels of low variable cost intermittent renewables lower wholesale electricity prices, and the depression of these prices could legitimately be recovered from consumers, preferably through capacity payments. Given that renewables are frequently subsidized for their learning benefits and carbon reduction, this paper asks what part of these subsidies should be recovered from final consumers. In long-run equilibrium, renewables have no impact on the number of hours peaking capacity runs, and its impact is to displace largely baseload capacity. The fall in competitive prices is considerably less than the fall in fossil operating costs and provides a case for only a modest share of total subsidies to be charged to electricity consumers. The paper quantifies the amount that can legitimately be charged.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Newbery, 2016. "The long-Run Equilibrium Impact of Intermittent Renewables on Wholesale Electricity Prices," Working Papers EPRG 1601, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1601
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    Cited by:

    1. Newbery, David M. & Greve, Thomas, 2017. "The strategic robustness of oligopoly electricity market models," Energy Economics, Elsevier, vol. 68(C), pages 124-132.
    2. Newbery, David M., 2023. "High renewable electricity penetration: Marginal curtailment and market failure under “subsidy-free” entry," Energy Economics, Elsevier, vol. 126(C).
    3. Matti Liski & Iivo Vehviläinen, 2016. "Gone with the Wind? An Empirical Analysis of the Renewable Energy Rent Transfer," CESifo Working Paper Series 6250, CESifo.
    4. David Newbery, 2020. "Club goods and a tragedy of the commons: the Clean Energy Package and wind curtailment," Working Papers EPRG2036, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Khezr, Peyman & Nepal, Rabindra, 2021. "On the viability of energy-capacity markets under decreasing marginal costs," Energy Economics, Elsevier, vol. 96(C).

    More about this item

    Keywords

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    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • 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
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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