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Pricing intermittent renewable energy

Author

Listed:
  • Ambec, Stefan
  • Crampes, Claude
  • Lamp, Stefan

Abstract

Governments support wind and solar investment through fixed-price contracts that reward output regardless of when it is produced. We show that efficiency requires adjusting the price with a technology-specific bonus–malus that reflects the covariance between renewable output and wholesale electricity prices. We estimate this adjustment for California, France, Germany, and Spain. We then express it in terms of technological parameters to assess the optimality of future renewable capacity targets. Finally, using a budget-neutral counterfactual, we show that adjusting Germany’s feed-in tariffs with the bonus–malus would have increased the market value of renewable generation by 3%, or €58 million.

Suggested Citation

  • Ambec, Stefan & Crampes, Claude & Lamp, Stefan, 2025. "Pricing intermittent renewable energy," TSE Working Papers 25-1653, Toulouse School of Economics (TSE), revised Oct 2026.
    • Handle: RePEc:tse:wpaper:130654
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    Cited by:

    1. Gollier, Christian, 2026. "Discounting along the merit order, with an application to the electricity market," TSE Working Papers 26-1762, Toulouse School of Economics (TSE).

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    Keywords

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    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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