The merit order effect of Czech renewable energy

Petra Lunackova, Jan Prusa and Karel Janda

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We assess the impact of photovoltaic power plants and other renewable sources on the electricity supply curve in the Czech Republic. The merit order effect is estimated as the elasticity of electricity spot price with respect to change in supply of electricity from renewable sources. Data for the Czech electricity spot market from 2010 to 2015 are analyzed as this is the period with the steepest increase in a renewable generation capacity. The effect is estimated separately for solar and other renewable sources. We find a significant difference between these two groups. Our results show that based on hourly, daily and weekly data energy produced by Czech solar power plants does not decrease electricity spot price, creating double cost to the end consumer. However, the merit order effect based on averaged daily and weekly data is shown to exist for other renewable sources excluding solar (mainly water and wind). This contributes to the conclusion that the Czech renewables policy that prefers solar to other renewable sources may be considered as suboptimal.

Keywords: energy subsidies; photovoltaic; renewables; merit order effect (search for similar items in EconPapers)
JEL-codes: H23 M21 Q42 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ene, nep-reg and nep-tra
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-17

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