The market value of variable renewables

Lion Hirth ()

Energy Economics, 2013, vol. 38, issue C, 218-236

Abstract: This paper provides a comprehensive discussion of the market value of variable renewable energy (VRE). The inherent variability of wind speeds and solar radiation affects the price that VRE generators receive on the market (market value). During windy and sunny times the additional electricity supply reduces the prices. Because the drop is larger with more installed capacity, the market value of VRE falls with higher penetration rate. This study aims to develop a better understanding on how the market value with penetration, and how policies and prices affect the market value. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and the calibrated model of the European electricity market EMMA. We find the value of wind power to fall from 110% of the average power price to 50–80% as wind penetration increases from zero to 30% of total electricity consumption. For solar power, similarly low value levels are reached already at 15% penetration. Hence, competitive large-scale renewable deployment will be more difficult to accomplish than as many anticipate.

Keywords: Variable renewables; Wind and Solar power; Market integration of renewables; Electricity markets; Intermittency; Cost -benefit analysis (search for similar items in EconPapers)
JEL-codes: C61 C63 D40 Q42 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (328)

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Related works:
Working Paper: The Market Value of Variable Renewables (2012)
Working Paper: The Market Value of Variable Renewables (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:38:y:2013:i:c:p:218-236

DOI: 10.1016/j.eneco.2013.02.004

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