Impact of wind and solar production on electricity prices: Quantile regression approach

Catherine, Linh Phuong; Lyócsa, Štefan; Molnár, Péter

doi:10.1080/01605682.2019.1634783

Cited by 12 publications

(8 citation statements)

References 67 publications

(62 reference statements)

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“…The supply side is determined by key factors such as energy source, and amount of renewable energy [54]. Fossil fuel costs fluctuate year to year, and the raw materials used to build renewable energy also experience price changes.…”

Section: Price Factorsmentioning

confidence: 99%

The Price of Wind: An Empirical Analysis of the Relationship between Wind Energy and Electricity Price across the Residential, Commercial, and Industrial Sectors

Dorrell

Lee

2021

Energies

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This paper quantifies the long-term impact of wind energy development on electricity prices across the residential, commercial, and industrial sectors in the United States. Our data set is made up of state level panel data from 2000 through 2018. This time period covers the vast majority of total wind energy capacity installed in the history of the USA. Our econometric model accounts for the primary factors that influence electricity prices, incorporating both fixed effects and general method of moments in order to more precisely isolate the effect of wind energy. The empirical results conclude that wind energy is positively and significantly related to electricity prices across all sectors, as indicated by the higher average electricity prices in states with higher percentages of wind energy. The price increase is largest in the industrial sector, followed by commercial, then residential. Wind turbine technology has become significantly more efficient, but the technical gains have been offset by the increased indirect costs of incorporating wind energy into the grid. Transmission and balancing costs have increased the final price to consumers. Our results highlight the need to view wind energy development from a more holistic perspective that accounts for structural and systemic costs. This will ensure the continued growth of wind energy. These results provide relevant insight to help wind energy developers, policy makers, and utility companies build a more sustainable energy future.

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Section: Price Factorsmentioning

confidence: 99%

The Price of Wind: An Empirical Analysis of the Relationship between Wind Energy and Electricity Price across the Residential, Commercial, and Industrial Sectors

Dorrell

Lee

2021

Energies

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“…One of the first papers to analyse the forward premium in the Nordic electricity market was by Botterud et al [8]. Using a dataset from 1996 and 2001, they found a significant positive forward premium, which increases as the length of the holding period increases.…”

Section: Explaining Variation In the Forward Premiummentioning

confidence: 99%

“…Using a dataset from 1996 and 2001, they found a significant positive forward premium, which increases as the length of the holding period increases. Botterud et al [8] also examined the effect of deviations from normal reservoir levels on the forward premium. However, this is only done through visual inspection of graphical plots of the reservoir deviations, spot and futures prices and the risk premium, and the results are preliminary at best.…”

Section: Explaining Variation In the Forward Premiummentioning

confidence: 99%

“…Some of the more influential early works, such as those of Bessembinder and Lemmon [2], Villaplana [6] and Longstaff and Wang [7], suffer from a short data time span. Additionally, as electricity markets are still relatively immature compared to other commodity markets, an important question yet to be answered is whether the observed premium represents the market price of risk or whether it represents market inefficiencies [5].Botterud et al [8], Lucia and Torró [4] and Weron and Zator [5] all found evidence of a forward premium in futures contracts traded on the Nordic electricity market. These papers use regression methods to describe the relationship between the observed forward premium and market conditions.…”

mentioning

confidence: 99%

“…Botterud et al [8], Lucia and Torró [4] and Weron and Zator [5] all found evidence of a forward premium in futures contracts traded on the Nordic electricity market. These papers use regression methods to describe the relationship between the observed forward premium and market conditions.…”

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confidence: 99%

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Determinants of the Forward Premium in the Nord Pool Electricity Market

2020

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Nord Pool is the leading power market in Europe. It has been documented that the forward contracts traded in this market exhibit a significant forward premium, which could be a sign of market inefficiency. Efficient power markets are important, especially when there is a goal to increase the share of the power mix stemming from renewable energy sources. We therefore contribute to the understanding of this topic by examining how the forward premium in the Nord Pool market depend on several economic and physical conditions. We utilise two methods: ordinary least squares and quantile regression. The results show that the reservoir level and the basis (the difference between the forward and spot price) have a significant impact on the forward premium. The realised volatility of futures prices and the implied volatility of the stock market have strong effects on both the conditional lower and upper tails of the forward premium. We also find that, as the market has matured, the forward premium has decreased, indicating an increase in market efficiency.

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