Renewable Risk and Its Impacts on Market Prices: The German Case

Abstract

This paper develops a framework for renewable producers to withhold capacity from the day-ahead market in response to higher renewable output risk. The developed hypotheses are tested on a rich dataset from the German electricity market, with a novel measure of renewable forecast risk. The data does not support the presence of renewable withholding in Germany, based on the observed risk premium and day-ahead supply bids. This suggests that firms do not have access to this information or do not regard this as relevant.

Keywords: Risk, Renewables, Trading, Forecast

JEL Classification: Q47, Q41, Q48