Effects of renewables on the stylized facts of electricity prices

Ballester, Clara Viana; Furió, Dolores

doi:10.1016/j.rser.2015.07.168

Cited by 92 publications

(42 citation statements)

References 18 publications

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“…The disturbances µ it and ε i are not cross-correlated and have the standard properties: 3 The variable took the value 0 before the year of liberalization and 1 afterwards. In countries where the liberalization occurred at July, the variable took the value 0 as the price was measured during the first semester.…”

Section: Estimation Methodology and Resultsmentioning

confidence: 99%

“…In spite of the decreasing wholesale electricity prices, mainly due to the so called "merit order effect" [3,42], the "non-contestable charges" growth are attributed to be the main cause of retail electricity prices increase [1]. These "non-contestable charges" were largely contested due to the contributing growth in renewable deployment incentives and the financial crisis in some European countries, like Spain and Italy [7].…”

Section: Review Of Earlier Studiesmentioning

confidence: 99%

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Assessing the determinants of household electricity prices in the EU: a system-GMM panel data approach

Silva

Cerqueira

2017

Renewable and Sustainable Energy Reviews

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A meaningful portion of the consumer basket of European households and companies is embodied by electricity as well as gas or refined petroleum products. As energy products are essential inputs of nearly all final goods and services, whichever change of energy prices has a direct impact of the general price level. In this context, the main purpose of this study is to assess the main drivers of household electricity prices in the European Union (EU), throughout a period of deep sector transformation. Relying on Eurostat data, not only we analyze the long-term progress of household electricity prices across the EU, but also we provide empirical evidence on their determinants while confronting the results with the EU energy policy path. For this purpose a firsthand approach is herein developed based on a dynamic model with panel data through GMM proposal method by Blundell and Bond (1998) [4] with the Windermeijer (2005) [41] correction. The data analysis provides grounds for a relation between the variable of household electricity prices with variables related to sector liberalization, renewable energy sources which support the EU policy to boost liberalization. This study offers evidence that the sector liberalization is accompanied by a decreasing trend in prices, which is consistent with the European Commission's objectives to liberalize.

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Section: Estimation Methodology and Resultsmentioning

confidence: 99%

Section: Review Of Earlier Studiesmentioning

confidence: 99%

Assessing the determinants of household electricity prices in the EU: a system-GMM panel data approach

Silva

Cerqueira

2017

Renewable and Sustainable Energy Reviews

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“…In this section, we test for Granger causality from solar power generation, wind power generation, and total electricity load to day-ahead electricity prices, within the already specified GARCH framework given by the equations (1) and (4), equations (2) and (4), and equations (3) and (4). In fact, we investigate in the spirit of Granger (1969) whether past information about solar power generation, wind power generation, or total electricity load improves the prediction of electricity prices, beyond predictions that are based merely on past electricity prices.…”

Section: Granger Causalitymentioning

confidence: 99%

“…In fact, we investigate in the spirit of Granger (1969) whether past information about solar power generation, wind power generation, or total electricity load improves the prediction of electricity prices, beyond predictions that are based merely on past electricity prices. 4 We do that in a multivariate context, and use the Wald (1943) test in order to investigate whether the coefficients of solar, wind, or load, respectively, are zero, thus not Granger-causing electricity prices.…”

Section: Granger Causalitymentioning

confidence: 99%

Electricity Prices, Large-Scale Renewable Integration, and Policy Implications

2016

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This paper investigates the effects of intermittent solar and wind power generation on electricity price formation in Germany. We use daily data from 2010 to 2015, a period with profound modifications in the German electricity market, the most notable being the rapid integration of photovoltaic and wind power sources, as well as the phasing out of nuclear energy. In the context of a GARCH-in-Mean model, we show that both solar and wind power Granger cause electricity prices, that solar power generation reduces the volatility of electricity prices by scaling down the use of peak-load power plants, and that wind power generation increases the volatility of electricity prices by challenging electricity market flexibility.JEL classification: C22; Q41; Q42.

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“…Therefore, an increase in renewables is expected to change and shift the supply curve in such a way that the spot price could be set at lower levels. This effect has been called in the literature the merit-order effect of renewables and has been highlighted in previous studies such as [1][2][3][4][5][6][7][8], among others (for a complete overview of past research on the merit-order effect of renewables, see [9]). A reduction in spot prices is welcomed by consumers and regulators.…”

Section: Introductionmentioning

confidence: 97%

Impact of Wind Electricity Forecasts on Bidding Strategies

Ballester¹,

Furió

2017

Sustainability

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Abstract:The change in the generation mix from conventional electricity sources to renewables has important implications for bidding behaviour and may have an impact on prices. The main goal of this work is to discover the role played by expected wind production, together with other relevant factors, in explaining the day-ahead market price through a data panel model. The Spanish market, given the huge increase in wind generation observed in the last decade, has been chosen for this study as a paradigmatic example. The results obtained suggest that wind power forecasts are a new key determinant for supply market participants when bidding in the day-ahead market. We also provide a conservative quantification of the effect of such trading strategies on marginal prices at an hourly level for a specific year in the sample. The consequence has been an increase in marginal price to levels higher than what could be expected in a context with notable wind penetration. Therefore, the findings of this work are of interest to practitioners and regulators and support the existence of a wind risk premium embedded in electricity prices to compensate for the uncertainty of wind production.

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Effects of renewables on the stylized facts of electricity prices

Cited by 92 publications

References 18 publications

Assessing the determinants of household electricity prices in the EU: a system-GMM panel data approach

Assessing the determinants of household electricity prices in the EU: a system-GMM panel data approach

Electricity Prices, Large-Scale Renewable Integration, and Policy Implications

Impact of Wind Electricity Forecasts on Bidding Strategies

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