Shifting supply as well as demand: the new economics of electricity with high renewables

Richard Green

Chapter 15 in Handbook on Electricity Markets, 2021, pp 408-427 from Edward Elgar Publishing

Abstract: This chapter shows how variable renewable generators (particularly solar and wind) can change the operation of electricity markets. Demand fluctuations have been the main drivers of short-term price variations in the past, but changes in renewable output can shift the supply curve by large amounts. The chapter shows how the traditional screening curve approach to electricity generation economics can be modified to take account of these changes. It then discusses the role of electricity transmission in smoothing fluctuations by spreading their effects over larger areas and in allowing renewable generatorsmarket access from distantresource-rich areas. Electricity storage can smooth fluctuations over time, and the chapter extends the standard "bath-tub" analysis of hydro storage to rechargeable storage facilities. It also discusses the operational challenges of providing enough reserveand inertia to deal with fluctuating outputs, and the price and revenue risks faced by generators.

Keywords: Economics and Finance; Environment; Law - Academic (search for similar items in EconPapers)
Date: 2021
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