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The green game changer: An empirical assessment of the effects of wind and solar power on the merit order

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  • Böckers, Veit
  • Giessing, Leonie
  • Rösch, Jürgen

Abstract

We estimate the impact of renewable energy sources on the merit order and the wholesale price in Spain. We use a structural vectorautoregressive model for the merit order of production and argue that wind and solar production are exogenous to the system. As expected the overall effect is negative for the wholesale price and the produced quantities of most generation technologies. The estimated impact, however, is biggest for mid-merit plants. This finding sheds light on the theoretical discussion about which power plants are affected most by renewable energy sources. The effect is also mainly driven by wind power. Solar energy increases wholesale prices as peak plants enlarge their production with more solar power.

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  • Böckers, Veit & Giessing, Leonie & Rösch, Jürgen, 2013. "The green game changer: An empirical assessment of the effects of wind and solar power on the merit order," DICE Discussion Papers 104, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:104
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    1. Sánchez de la Nieta, A.A. & Contreras, J., 2020. "Quantifying the effect of renewable generation on day–ahead electricity market prices: The Spanish case," Energy Economics, Elsevier, vol. 90(C).
    2. Olukunle O. Owolabi & Toryn L. J. Schafer & Georgia E. Smits & Sanhita Sengupta & Sean E. Ryan & Lan Wang & David S. Matteson & Mila Getmansky Sherman & Deborah A. Sunter, 2021. "Role of Variable Renewable Energy Penetration on Electricity Price and its Volatility Across Independent System Operators in the United States," Papers 2112.11338, arXiv.org, revised Nov 2022.
    3. Li Li & Junqi Liu & Lei Zhu, 2020. "Dynamics of energy technology diffusion under uncertainty," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 36(5), pages 795-808, September.
    4. Paschen, Marius, 2016. "Dynamic analysis of the German day-ahead electricity spot market," Energy Economics, Elsevier, vol. 59(C), pages 118-128.
    5. Liu, Tingting & Xu, Jiuping, 2021. "Equilibrium strategy based policy shifts towards the integration of wind power in spot electricity markets: A perspective from China," Energy Policy, Elsevier, vol. 157(C).
    6. Jenniches, Simon & Worrell, Ernst & Fumagalli, Elena, 2019. "Regional economic and environmental impacts of wind power developments: A case study of a German region," Energy Policy, Elsevier, vol. 132(C), pages 499-514.
    7. Winkler, Jenny & Gaio, Alberto & Pfluger, Benjamin & Ragwitz, Mario, 2016. "Impact of renewables on electricity markets – Do support schemes matter?," Energy Policy, Elsevier, vol. 93(C), pages 157-167.

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