An empirical study of the merit order effects in the Texas energy market via quantile regression

Rudolph, Mary; Damien, Paul; Zarnikau, Jay

doi:10.1504/ijaom.2021.120506

Cited by 1 publication

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“…While the statistical association between wind generation and wholesale pricing is unambiguous, the same is not true of solar generation. Complementing previous research, such as Maciejowska (2020) and Rudolph et al (2021), we find that, even with increased tax incentives, the MOE from solar energy is either negligible, or is not statistically significant [10,29]. As described in previous sections, solar energy is still a growing resource in the ERCOT.…”

Section: Discussionsupporting

confidence: 84%

“…The independent variables used in this paper are consistent with what other researchers have suggested and used in the present context [10,21,22]. The continuous independent variables (on the natural logarithm scale) include:…”

Section: Independent Variablesmentioning

confidence: 77%

“…Natural gas prices for Henry Hub (located in Erath, Louisiana) were obtained from the DOE/EIA.1. As Rudolph et al (2021) note, Henry Hub prices replace local natural gas prices, since they bypass any endogeneity issue that local natural gas prices might induce [10]. Moreover, Henry Hub prices are highly correlated with local natural gas prices (r > 0.95).…”

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confidence: 99%

“…In 2019, the Public Utility Commission of Texas required the ERCOT to increase revenue to generators by shifting the Operating Reserves Demand Curve. Rudolph et al (2021) noted that "the subsequent impact on market prices is very difficult to model" [10].…”

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confidence: 99%

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The Impact of Renewable Energy Tax Incentives on Electricity Pricing in Texas

Rudolph

Damien

2023

Applied Sciences

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Texas has abundant natural resources, making it a good place for renewable energy facilities to build. Unfortunately, property taxes are the highest tax on an incoming renewable energy facility in the state. In order to increase renewable energy in the state, Texas tax code Chapter 313 was introduced. Chapter 313 allows school districts the opportunity to offer a 10-year limit, ranging from USD 10 million to USD 100 million, on the taxable value of a new green energy project. With Chapter 313 ending in 2022, the following question is raised: how do tax incentives that increase the number of applications for producing renewable energy in Texas impact the wholesale, real-time pricing of electricity in the state? Skew-t regression models were implemented on a large dataset, focusing on the designated North, Houston, and West regions of the Electricity Reliability Council of Texas (ERCOT), since these regions account for 80% of the state’s energy consumption. Analysis focused on the hours ending at 3 AM, 11 AM, and 4 PM, due to the ERCOT’s time-of-day pricing. Three key findings related to the above question resulted. First, tax incentives that increase the number of active wind and solar facilities lead to a statistically significant (p < 0.0001) reduction in wholesale electricity price (USD/MWh), ranging between 2.31% and 6.6% across the ERCOT during different hours of the day. Second, for a 10% increase in tax-incentivized green energy generation, during a 24-hour period, there is a statistically significant (p < 0.0001) reduction in the generation cost (USD/MWh), ranging between 0.82% and 1.96%. Finally, electricity price reductions from solar energy are much lower than those from wind generation and/or are not statistically significant.

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Section: Discussionsupporting

confidence: 84%

Section: Independent Variablesmentioning

confidence: 77%

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confidence: 99%

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confidence: 99%

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