 From Model Optimality to Market Reality: Do Electricity Markets Support Renewable Investments?Anas Abuzayed Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge Abstract: This study investigates the future market values of photovoltaics and wind energy in Germany to assess their economic profitability without financial interventions. Using an open-source optimization model benchmarked against 2019–2024 data, we model the wholesale electricity market under the official expansion scenarios with projected carbon and gas price trajectories. Results show that despite higher wholesale electricity prices compared to pre-crisis levels, low capture prices, particularly for photovoltaics, may deter its future profitability. Contrary to that, onshore wind achieves higher capture prices, suggesting greater potential for self-financing under higher carbon and gas prices. However, market dynamics still pose risks, including price cannibalization and infra-marginal effects during generation oversupply periods. Policy interventions, including market design reforms and long-term instruments are critical to ensure stable revenues and align market conditions with renewable energy expansion goals. Keywords: Market Value of Renewables; Subsidy-Free Electricity Markets; Renewable Energy Policy; Energy-Only Markets; Electricity Market Design (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2558 Access Statistics for this paper More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge |
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