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Revisiting the Merit-Order Effect of Renewable Energy Sources by Hildmann, Marcus; Ulbig, Andreas; Andersson, Göran is a scholarly article available to read on EtoBox.

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An on-going debate in the energy economics and power market community has raised the question if energy-only power markets are increasingly failing due to growing feed-in shares from subsidized renewable energy sources (RES). The short answer to this is: No, they are not failing. Energy-based power markets are, however, facing several market distortions, namely from the gap between the electricity volume traded at day-ahead markets versus the overall electricity consumption as well as the (wrong) regulatory assumption that variable RES generation, i.e., wind and photovoltaic (PV), truly have zero marginal operation costs. In this paper we show that both effects over-amplify the well-known merit-order effect of RES power feed-in beyond a level that is explainable by underlying physical realities, i.e., thermal power plants being willing to accept negative electricity prices to be able to stay online due to considerations of wear & tear and start-stop constraints. We analyze the impacts of wind and PV power feed-in on the day-ahead market for a region that is already today experiencing significant feed-in tariff (FIT)-subsidized RES power feed-in, the EPEX German-Austrian market zone

Author

Hildmann, Marcus; Ulbig, Andreas; Andersson, Göran

Published

2013

Language

EN