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Decreasing market value of variable renewables can be avoided by policy action

Brown, T.; Reichenberg, L.


Although recent studies have shown that electricity systems with shares of wind and solar above 80% can be affordable, economists have raised concerns about market integration. Correlated generation from variable renewable sources depresses market prices, which can cause wind and solar to cannibalise their own revenues and prevent them from covering their costs from the market. This cannibalisation appears to set limits on the integration of wind and solar, and thus to contradict studies that show that high shares are cost effective. Here we show from theory and with simulation examples how market incentives interact with prices, revenue and costs for renewable electricity systems. The decline in average revenue seen in some recent literature is due to an implicit policy assumption that technologies are forced into the system, whether it be with subsidies or quotas. This decline is mathematically guaranteed regardless of whether the subsidised technology is variable or not. If instead the driving policy is a carbon dioxide cap or tax, wind and solar shares can rise without cannibalising their own market revenue, even at penetrations of wind and solar above 80%. ... mehr

Verlagsausgabe §
DOI: 10.5445/IR/1000133800
Veröffentlicht am 11.06.2021
DOI: 10.1016/j.eneco.2021.105354
Zitationen: 37
Zitationen: 61
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Automation und angewandte Informatik (IAI)
Publikationstyp Zeitschriftenaufsatz
Publikationsmonat/-jahr 08.2021
Sprache Englisch
Identifikator ISSN: 0140-9883
KITopen-ID: 1000133800
HGF-Programm 37.12.02 (POF IV, LK 01) Design,Operation & Digitalization of the Future Energy Grids
Erschienen in Energy economics
Verlag Elsevier
Band 100
Seiten Article: 105354
Nachgewiesen in Scopus
Web of Science
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