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Does renewable energy generation decrease the volatility of electricity prices? An analysis of Denmark and Germany
Stockholm University, Faculty of Social Sciences, Department of Computer and Systems Sciences. University College, UK.
Number of Authors: 3
2017 (English)In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 62, 270-282 p.Article in journal (Refereed) Published
Abstract [en]

Although variable renewable energy (VRE) technologies with zero marginal costs decrease electricity prices, the literature is inconclusive about how the resulting shift in the supply curves impacts price volatility. Because the flexibility to respond to high peak and low off-peak prices is crucial for demand-response applications and may compensate for the losses of conventional generators caused by lower average prices, there is a need to understand how the penetration of VRE affects volatility. In this paper, we build distributed lag models with Danish and German data to estimate the impact of VRE generation on electricity price volatility. We find that in Denmark wind power decreases the daily volatility of prices by flattening the hourly price profile, but in Germany it increases the volatility because it has a stronger impact on off-peak prices. Our analysis suggests that access to flexible generation capacity and wind power generation patterns contribute to these differing impacts. Meanwhile, solar power decreases price volatility in Germany. By contrast, the weekly volatility of prices increases in both areas due to the intermittency of VRE. Thus, policy measures for facilitating the integration of VRE should be tailored to such region-specific patterns.

Place, publisher, year, edition, pages
2017. Vol. 62, 270-282 p.
Keyword [en]
Electricity price volatility, Time-series model, Wind power, Solar power, Nord Pool, EEX
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-142523DOI: 10.1016/j.eneco.2016.12.019ISI: 000397376200023OAI: oai:DiVA.org:su-142523DiVA: diva2:1094277
Available from: 2017-05-09 Created: 2017-05-09 Last updated: 2017-05-09Bibliographically approved

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Siddiqui, Afzal S.
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Citation style
  • apa
  • harvard1
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  • modern-language-association-8th-edition
  • vancouver
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Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
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Output format
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  • text
  • asciidoc
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