Bidding zero? An analysis of solar power plants’ price bids in the electricity day-ahead market

Silke Johanndeiter and Valentin Bertsch

Applied Energy, 2024, vol. 371, issue C, No S0306261924010559

Abstract: Typically, solar power is offered for price bids at the level of their near zero marginal costs to electricity markets. While aggregate effects of this behaviour on prices (merit-order effect) and profits (cannibalisation effect) have been studied extensively, potential deviations from this strategy still lack an understanding. We observe a group of firms to offer solar power for prices larger than zero to the Iberian electricity day-ahead market. Based on a literature review and analysing incentives set for solar power by the Spanish electricity market design, we suggest these price bids to result from revenue opportunities in sequential markets. Results of our regression analyses confirm that the observed group of firms is more likely to conduct arbitrage. This motive also allows for explaining the level of a case-study firm’s price bids.

Keywords: Renewables; Wholesale electricity markets; Sequential markets; Bidding strategies (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1016/j.apenergy.2024.123672

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