The cannibalization effect of wind and solar in the California wholesale electricity market

Prol, Javier López; Steininger, Karl W.; Zilberman, David

doi:10.1016/j.eneco.2019.104552

Cited by 94 publications

(51 citation statements)

References 19 publications

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“…The more these variable renewable energy sources are deployed, the stronger prices decrease in times of high availability of these sources, and the lower the average value of that electricity tends to become (e.g., Grubb, 1991;Joskow, 2011;Mills and Wiser, 2012;Hirth, 2013;Gowrisankaran et al, 2016;López Prol et al, 2020). This drop in value can be significant.…”

Section: Introductionmentioning

confidence: 99%

Heating with wind: Economics of heat pumps and variable renewables

2020

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With the growth of wind and solar energy in electricity supply, the electrification of space heating is becoming a promising decarbonization option. In turn, such electrification may help the power system integration of variable renewables, for two reasons: thermal storage could provide low-cost flexibility and heat demand is seasonally correlated with wind power. However, temporal fluctuations in heat demand may also imply new challenges for the power system. This study assesses the economic characteristics of electric heat pumps and wind energy and studies their interaction on wholesale electricity markets. Using a numerical electricity market model, we estimate the economic value of wind energy and the economic cost of powering heat pumps. We find that, just as expanding wind energy depresses its €/MWhel value, adopting heat pumps increases their €/MWhel cost. This rise can be mitigated by synergistic effects with wind power, "system-friendly" heat pump technology, and thermal storage. Furthermore, heat pumps raise the wind market value, but this effect vanishes if accounting for the additional wind energy needed to serve the heat pump load. Thermal storage facilitates the system integration of wind power but competes with other flexibility options. For an efficient adoption of heat pumps and thermal storage, we argued that retail tariffs for heat pump customers should reflect their underlying economic cost.

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Section: Introductionmentioning

confidence: 99%

Heating with wind: Economics of heat pumps and variable renewables

2020

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“…The result obtained for the early-potato rotation when the APV shed is oriented due Southwest is in line with Trommsdorff [56], who, for organic potatoes cultivated beneath the APV shed described by Schindele et al [8], obtained an IRR 1.6% lower than WACC. In a broader sense, López Prol et al [43] wondered if renewable energy generators like PV would ever be competitive considering the faster decline of the wholesale market price compared to the LCoE. From the inception of our study, it was envisaged that a negative factor for APV system profitability would be the high CapEx compared to conventional ground-mounted PV power plants.…”

Section: Discussionmentioning

confidence: 98%

“…Finally, we assigned the OMIP FTS mean price previously calculated, 45.02 EUR/MWh, to the first period of 9 years; a price diminished by 5% to the second period (0.95•45.02 = 42.77 EUR/MWh); and a price diminished by 10% to the last 8-year period (0.90•45.02 = 40.52 EUR/MWh). The reason to assign the foregoing reduced prices to the second and third period is that foreseeably-and unfortunately for generators-increasing solar PV capacity installed in the forthcoming years will lead to decline of wholesale electricity prices [43]. Table 6 is a compilation of estimated decreases in crop yield due to APV shed shading compared to full-sunlight cultivation.…”

Section: Profitability Analysismentioning

confidence: 99%

Techno-Economic Viability of Agro-Photovoltaic Irrigated Arable Lands in the EU-Med Region: A Case-Study in Southwestern Spain

et al. 2021

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Solar photovoltaic (PV) energy is positioned to play a major role in the electricity generation mix of Mediterranean countries. Nonetheless, substantial increase in ground-mounted PV installed capacity could lead to competition with the agricultural use of land. A way to avert the peril is the electricity-food dual use of land or agro-photovoltaics (APV). Here, the profitability of a hypothetical APV system deployed on irrigated arable lands of southwestern Spain is analyzed. The basic generator design, comprised of fixed-tilt opaque monofacial PV modules on a 5 m ground-clearance substructure, featured 555.5 kWp/ha. Two APV shed orientations, due south and due southwest, were compared. Two 4-year annual-crop rotations, cultivated beneath the heightened PV modules and with each rotation spanning 24 ha, were studied. One crop rotation was headed by early potato, while the other was headed by processing tomato. All 9 crops involved fulfilled the two-fold condition of being usually cultivated in the area and compatible with APV shed intermitent shading. Crop revenues under the partial shading of PV modules were derived from official average yields in the area, through the use of two alternative sets of coefficients generated for low and high crop-yield shade-induced penalty. Likewise, two irrigation water sources, surface and underground, were compared. Crop total production costs, PV system investment and operating costs and revenues from the sale of electricity, were calculated. The internal rates of return (IRRs) obtained ranged from a minimum of 3.8% for the combination of southwest orientation, early-potato rotation, groundwater and high shade-induced crop-yield penalty, to a maximum of 5.6% for the combination of south orientation, processing-tomato rotation, surface water and low shade-induced crop-yield penalty.

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“…These objectives led to the establishment of incentives to variable renewable energy (VRE), increasing their penetration but also the retail prices. One of the main issues is that VREs have a variable production, so they increase the uncertainty of the net load, and have significantly capital costs, but near-zero production costs, decreasing the prices of wholesale markets, resulting in a tariff deficit, i.e., the difference between the incentive and the market value of the energy supplied by the technology, paid by consumers [4,[9][10][11][12]. Retailers face the same uncertainty problem when forecasting the consumption of their clients [13,14].…”

Section: Introductionmentioning

confidence: 99%

The Role of Local Citizen Energy Communities in the Road to Carbon-Neutral Power Systems: Outcomes from a Case Study in Portugal

Algarvio

2021

Smart Cities

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Global warming contributes to the worldwide goal of a sustainable carbon-neutral society. Currently, hydroelectric, wind and solar power plants are the most competitive renewable technologies. They are limited to the primary resource availability, but while hydroelectric power plants (HPPs) can have storage capacity but have several geographical limitations, wind and solar power plants have variable renewable energy (VRE) with stochastic profiles, requiring a substantially higher investment when equipped with battery energy storage systems. One of the most affordable solutions to compensate the stochastic behaviour of VRE is the active participation of consumers with demand response capability. Therefore, the role of citizen energy communities (CECs) can be important towards a carbon-neutral society. This work presents the economic and environmental advantages of CECs, by aggregating consumers, prosumers and VRE at the distribution level, considering microgrid trades, but also establishing bilateral agreements with large-scale VRE and HPPs, and participating in electricity markets. Results from the case-study prove the advantages of CECs and self-consumption. Currently, CECs have potential to be carbon-neutral in relation to electricity consumption and reduce consumers’ costs with its variable term until 77%. In the future, electrification may allow CECs to be fully carbon-neutral, if they increase their flexibility portfolio.

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The cannibalization effect of wind and solar in the California wholesale electricity market

Cited by 94 publications

References 19 publications

Heating with wind: Economics of heat pumps and variable renewables

Heating with wind: Economics of heat pumps and variable renewables

Techno-Economic Viability of Agro-Photovoltaic Irrigated Arable Lands in the EU-Med Region: A Case-Study in Southwestern Spain

The Role of Local Citizen Energy Communities in the Road to Carbon-Neutral Power Systems: Outcomes from a Case Study in Portugal

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