Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy

Matti Liski and Iivo Vehviläinen

Journal of the Association of Environmental and Resource Economists, 2020, vol. 7, issue 5, 873 - 900

Abstract: What are the final equilibrium impacts of renewable energy investments on consumer and producer surpluses? This paper offers an approach to quantify the surplus breakdown in a market dominated by renewables and sufficient storage to counterbalance their intermittency—the Nordic electricity market. Wind power entry has strong distributional impacts: 10% market share for wind generation changes the consumer side surplus by an amount that is equivalent to a 40% decline in expenditures, at the cost of incumbents’ surplus. The surplus transfer is big enough to cover the cost of subsidizing entry.

Date: 2020
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