Electricity Prices, Large-Scale Renewable Integration, and Policy Implications

36 Pages Posted: 25 Nov 2016

See all articles by Evangelos Kyritsis

Evangelos Kyritsis

VATT Institute for Economic Research; Norwegian School of Economics (NHH) - ENE Research Centre

Jonas Andersson

Norwegian School of Economics (NHH) - Department of Business and Management Science

Apostolos Serletis

University of Calgary - Department of Economics

Date Written: November 22, 2016

Abstract

This paper investigates the effects of intermittent solar and wind power generation on electricity price formation in Germany. We use daily data from 2010 to 2015, a period with profound modifications in the German electricity market, the most notable being the rapid integration of photovoltaic and wind power sources, as well as the phasing out of nuclear energy. In the context of a GARCH-in-Mean model, we show that both solar and wind power Granger cause electricity prices, that solar power generation reduces the volatility of electricity prices by scaling down the use of peak-load power plants, and that wind power generation increases the volatility of electricity prices by challenging electricity market exibility.

Keywords: Intermittency, Large-scale integration, Merit-order effect, Volatility, GARCH-in-Mean model

JEL Classification: C22, Q41, Q42

Suggested Citation

Kyritsis, Evangelos and Andersson, Jonas and Serletis, Apostolos, Electricity Prices, Large-Scale Renewable Integration, and Policy Implications (November 22, 2016). NHH Dept. of Business and Management Science Discussion Paper No. 2016/18. Available at SSRN: https://ssrn.com/abstract=2874333 or http://dx.doi.org/10.2139/ssrn.2874333

Evangelos Kyritsis (Contact Author)

VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Norwegian School of Economics (NHH) - ENE Research Centre ( email )

Helleveien 30
Bergen, NO-5045
Norway

Jonas Andersson

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Apostolos Serletis

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

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