Intermittently renewable energy, optimal capacity mix and prices in a deregulated electricity market

Milstein, Irena; Tishler, Asher

doi:10.1016/j.enpol.2010.11.008

Cited by 91 publications

(23 citation statements)

References 29 publications

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“…It can be seen that further implementation of renewable (wind) capacity will have a relatively small impact during peak hours, but will significantly increase price volatility during medium and low price hours, especially in a +20 000 MW scenario. This is consistent with results in Milstein and Tishler (2011) who analysed introduction of solar PV production to the Israeli electricity market. As seen from Figure 6, only 223 out of 8760 hours in year 2011 had actual prices of less than 10 EUR/MWh.…”

Section: Implications For Future Price Trends: Modelling Methodologysupporting

confidence: 80%

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The dangers of marginal cost based electricity pricing

Pikk¹,

Viiding²

2013

Baltic Journal of Economics

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Led by energy and environmental policies the EU power sector is undergoing vast changes to achieve a market driven and sustainable future. Market based price discovery and different renewable support schemes are seen as key solutions in achieving the desired future production mix. Most liquid power markets use marginal cost based price discovery where the price is set by marginal costs of the last producer needed to cover all load, usually a fossil fuel power plant. At the same time the majority of new investments are made with significant help from government support schemes in renewable production capacities, which have very low marginal costs. The increasing share of renewable production will thus impact price levels in day-ahead markets. This paper analyses the potential impact of more renewable electricity production on price discovery in the NordPool Spot market, which already has a high share of renewable electricity traded. Results show that ceteris paribus NordPool Spot is likely to have very high price volatility in the future and alternative revenue sources are required for new investments.

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Section: Implications For Future Price Trends: Modelling Methodologysupporting

confidence: 80%

“…not wind or solar) producers could participate. Another option would be to integrate the entire power system management from "smart consumption" through "smart grids" to flexible power generation from lower base load capacity as discussed by Milstein andTishler (2011) andNicolosi (2010).…”

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confidence: 99%

The dangers of marginal cost based electricity pricing

Pikk¹,

Viiding²

2013

Baltic Journal of Economics

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“…Various assessments uncover this effect for wind electricity generation (Neubarth et al, 2006;Nicolosi, 2010;Ray et al, 2010). Due to increasing production levels, the merit-order effect can also be observed for solar PV electricity (Milstein and Tishler, 2011). On the other hand, intermittent renewable power not only influences price level, but also price volatility (Klinge Jacobsen and Zvingilaite, 2010;Cramton and Ockenfels, 2011).…”

Section: Introductionmentioning

confidence: 99%

The impact of wind power generation on the electricity price in Germany

Ketterer¹

2014

Energy Economics

419

250

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides insight into the relationship between intermittent wind power generation and electricity price behaviour in Germany. Using a GARCH model, the effect of wind electricity in-feed on level and volatility of the electricity price can be evaluated in an integrated approach. The results show that variable wind power reduces the price level but increases its volatility. With a low and volatile wholesale price, the profitability of electricity plants, conventional or renewable, is more uncertain. Consequently, the construction of new plants is at risk, which has major implications for the energy market and the security of supply. These challenges, related to the integration of renewables, require adjustments to the regulatory and the policy framework of the electricity market. This paper's results suggest that regulatory change is able to stabilise the wholesale price. It is found that the electricity price volatility has decreased in Germany after the marketing mechanism of renewable electricity was modified. This gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system. JEL Code: Q42, Q48, C22. Terms of use: Documents in

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“…First, rising electricity prices and increasing price volatility (Bierbrauer et al, 2007;Valenzuela et al, 2012) will encourage electricity retailers to implement and extend their Demand Response activities. The underlying reason is, as the literature on renewables suggests, that an increase in intermittent wind and solar generation comes at the cost of an increase in the spot-price variance (Chao, 2011;Green and Vasilakos, 2010;Jacobsen and Zvingilaite, 2010;Milstein and Tishler, 2011;Woo et al, 2011). Second, the penetration of Demand Response programs will also increase due to regulatory settings.…”

Section: Policy Implicationsmentioning

confidence: 99%

Measuring the financial impact of demand response for electricity retailers

Feuerriegel

Neumann

2014

Energy Policy

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Due to the integration of intermittent resources of power generation such as wind and solar, the amount of supplied electricity will exhibit unprecedented fluctuations. Electricity retailers can partially meet the challenge of matching demand and volatile supply by shifting power demand according to the fluctuating supply side. The necessary technology infrastructure such as Advanced Metering Infrastructures for this so-called Demand Response (DR) has advanced. However, little is known about the economic dimension and further effort is strongly needed to realistically quantify the financial impact. To succeed in this goal, we derive an optimization problem that minimizes procurement costs of an electricity retailer in order to control Demand Response usage. The evaluation with historic data shows that cost volatility can be reduced by 7.74 %; peak costs drop by 14.35 %; and expenditures of retailers can be significantly decreased by 3.52 %.

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Intermittently renewable energy, optimal capacity mix and prices in a deregulated electricity market

Cited by 91 publications

References 29 publications

The dangers of marginal cost based electricity pricing

The dangers of marginal cost based electricity pricing

The impact of wind power generation on the electricity price in Germany

Measuring the financial impact of demand response for electricity retailers

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