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The Impact of Wind Power Generation on the Electricity Price in Germany

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  • Janina Ketterer

Abstract

This paper provides insight into the relationship between intermittent wind power generation and electricity price behaviour in Germany. Using a GARCH model, the effect of wind electricity in-feed on level and volatility of the electricity price can be evaluated in an integrated approach. The results show that variable wind power reduces the price level but increases its volatility. With a low and volatile wholesale price, the profitability of electricity plants, conventional or renewable, is more uncertain. Consequently, the construction of new plants is at risk, which has major implications for the energy market and the security of supply. These challenges, related to the integration of renewables, require adjustments to the regulatory and the policy framework of the electricity market. This paper’s results suggest that regulatory change is able to stabilise the wholesale price. It is found that the electricity price volatility has decreased in Germany after the marketing mechanism of renewable electricity was modified. This gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system.

Suggested Citation

  • Janina Ketterer, 2012. "The Impact of Wind Power Generation on the Electricity Price in Germany," ifo Working Paper Series 143, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_143
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    More about this item

    Keywords

    Renewable energy sources; intermittency; electricity price;
    All these keywords.

    JEL classification:

    • 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
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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