Renewable energy regulation and structural breaks: An empirical analysis of Spanish electricity price volatility

Ciarreta, Aitor; Pizarro-Irizar, Cristina; Zarraga, Ainhoa

doi:10.1016/j.eneco.2020.104749

Cited by 41 publications

(28 citation statements)

References 43 publications

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“…Both Rai and Nunn (2020) in Australia and Ballester and Furió (2015) in Spain find that VRE increases volatility, but reduces the persistence of price spikes. Finally, Ciarreta et al (2020) show that market design and VRE regulation choices may reduce price volatility even as VRE penetration increases.…”

Section: Price Volatilitymentioning

confidence: 97%

The Economics of Variable Renewables and Electricity Storage

Prol,

Schill

2020

Preprint

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The transformation of the electricity sector is a main element of the transition to a decarbonized economy. Conventional generators powered by fossil fuels have to be replaced by variable renewable energy (VRE) sources in combination with electricity storage and other options for providing temporal flexibility. We discuss the market dynamics of increasing VRE penetration and their integration in the electricity system. We describe the merit-order effect (decline of wholesale electricity prices as VRE penetration increases) and the cannibalization effect (decline of VRE value as their penetration increases). We further review the role of electricity storage and other flexibility options for integrating variable renewables, and how storage can contribute to mitigating the two mentioned effects. We also use a stylized open-source model to provide some graphical intuition on this. While relatively high shares of VRE are achievable with moderate amounts of electricity storage, the role of long-term storage increases as the VRE share approaches 100%.

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Section: Price Volatilitymentioning

confidence: 97%

The Economics of Variable Renewables and Electricity Storage

Prol,

Schill

2020

Preprint

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“…In fact, solar booms have only taken place in countries using FIT mechanisms. Consequently, the cutback of RES promotion costs by reversing the previously set supports and dismantling the renewable energy policies has become a policy priority and a major concern in many countries all over the world, such as Spain, France, Italy and Czech Republic [3,10,11,16,17,27,28,34,44,45].…”

Section: Introduction 1setting the Contextmentioning

confidence: 99%

“…As for the 2008-2020 containment period, the Spanish RES feed-in policy began to be dismantled by means of retroactive cost-containment measures until it was totally repealed by the electricity reform enacted in 2013, specifically the Spanish electricity sector (SES) Law 24/2013, in an attempt to tackle the overrun cost derived from the excessive RES support incentives (mostly related to solar PV promotion), and therefore the growing tariff deficit of the electricity system [3,15,18,29,30,36,45,46]. During that period, the Spanish solar PV sector suffered a significant bust, becoming the first European country to experience a clear boom-and-bust cycle in the solar PV sector.…”

Section: Introduction 1setting the Contextmentioning

confidence: 99%

23 Years of Development of the Solar Power Generation Sector in Spain: A Comprehensive Review of the Period 1998–2020 from a Regulatory Perspective

et al. 2022

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Spain has become one of the leading countries in the world in promoting electricity generation from renewable energy sources (RES), due to their positive socioeconomic and environmental impacts, through highly favorable regulatory frameworks and public incentives set by Spanish governments mainly during the first decade of 2000s, i.e., Royal Decree (RD) 2818/1998, RD 436/2004 and RD 661/2007. Conversely, the highly favorable regime applicable to RES, and specifically to solar power plants during the 1998–2008 promotion period turned into an extremely unfavorable scenario during the 2008–2020 cost-containment stage, characterized by the dismantling of the previous promotion schemes so as to reduce the skyrocketing electricity system tariff deficit, in which regulations such as RD 1578/2008, Royal Decree Law (RDL) 6/2009, RDL 14/2010, RDL 1/2012, Law 15/2012, RDL 9/2013, Law 24/2013 and RD 413/2014 stood out. Nonetheless, the Spanish renewable sector, and especially the solar power sector, has shown great dynamism in its energy policy in the period 1998–2020. This academic contribution provides a comprehensive review of the energy policy evolution for the whole solar power sector in Spain, specifically both solar photovoltaic (PV) and concentrating solar power (CSP) plants, over the last 23 years. Thus, considering both the boom in the solar power sector as well as the solar sector’s bust, a survey of the different legislation in force during the 1998–2020 period, as well as of the existing academic literature dealing with this issue, is conducted to first contextualize and describe, and then carefully assess, the last 23 years of solar energy policy in Spain. In brief, the decisive role of the Spanish government in developing the RES sector, and especially the solar power sector, in recent years has been noted. In this vein, a good planning of the energy development model, the regulatory stability, the simplicity and agility of the corresponding administrative process, the appropriate design of support mechanisms, as well as security and predictability of support levels in the mid and long term, play an important role in providing certainty to all the stakeholders. During the 1998–2008 promotion stage, even with a stable, quite favorable and easily predictable RES support mechanism in place, the Spanish solar system behaved as an open-loop system without any control structure detecting and reacting to problematic situations. The fact that the Spanish government was compelled to implement ex-post measures during the period 2008–2020, seriously jeopardizing the viability of the power plants in operation, as well as compromising the legal–economic stability of the renewable energy sector, clearly indicated a malfunctioning of the energy policy control mechanism. In essence, it is hoped that the lessons extracted from this 23-year comprehensive review of the Spanish solar power sector pathway could be quite useful for other countries either in the initial development stage or fully immersed in the promotion of solar power sector or any other renewable technology.

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“…The increasing electricity prices have become a heavy burden on household and industrial users. On the other side, both the EU and the Spanish government proposed the policy goal of achieving affordable energy prices during the RE transition process [ 3 , 4 , 5 ]. Although Spain has reached its 2020 target to obtain 42% of its electricity from renewables [ 2 , 6 ], the current price situation shows that it has not achieved its affordable price policy target.…”

Section: Introductionmentioning

confidence: 99%

“…(4) For state industrial access restrictions, 85% of energy production, 100% of the distribution network, and 90% of final sales are controlled by four giant firms (Endesa, Iberdrola, Naturgy, and EDP). Moreover, Spain fails the EU goal and Spanish National Energy Poverty Strategy 2019–2024 to provide affordable energy prices as part of the green energy transition [ 3 , 4 , 5 ]. (5) Our data analysis shows that Spain is conducting energy transition positively regarding enhancing RE innovation and reducing greenhouse gas (GHG) emissions.…”

Section: Introductionmentioning

confidence: 99%

A Free-Market Environmentalist Enquiry on Spain’s Energy Transition along with Its Recent Increasing Electricity Prices

Wang

Espinosa

Soto

2022

IJERPH

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This paper analyzes the Spanish energy transition’s general situation and its increasing electricity prices in recent years from a free-market environmentalist (FME) approach. We hypothesize and argue that high taxes, high government subsidies, and government industrial access restrictions breach private property rights, hindering Spain’s renewable energy (RE) development. Our paper discovers that Spain’s state-interventionist policies have increased the cost of the energy and power industries, leading to electricity prices remaining relatively high before and after the outbreak of the COVID-19 pandemic. After reviewing the literature on the FME approach and Spain’s case, a Box–Jenkins (ARIMA) model is used to clarify the economic performance of the Spanish electricity industry with a proposal for forecasting electricity prices. It is observed that Spain fails the EU and its national goal of providing an affordable energy price as a part of the green energy transition. Finally, free-market environmental solutions and policy reforms are proposed to facilitate Spain’s energy transition.

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Renewable energy regulation and structural breaks: An empirical analysis of Spanish electricity price volatility

Cited by 41 publications

References 43 publications

The Economics of Variable Renewables and Electricity Storage

The Economics of Variable Renewables and Electricity Storage

23 Years of Development of the Solar Power Generation Sector in Spain: A Comprehensive Review of the Period 1998–2020 from a Regulatory Perspective

A Free-Market Environmentalist Enquiry on Spain’s Energy Transition along with Its Recent Increasing Electricity Prices

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