Setting with the Sun: The Impacts of Renewable Energy on Wholesale Power Markets

James Bushnell and Kevin Novan

No 24980, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Policies supporting investment in renewable electricity have been a cornerstone of climate policy in many parts of the world. While previous empirical work explores the economic and environmental impacts of renewable production, the focus has exclusively been on the short-run impacts of expanding renewable supply. In this paper, we shed light on the longer run impacts of renewable expansions. Focusing on the California electricity market, we estimate how wholesale electricity prices have responded to a dramatic increase in utility-scale solar capacity. While a substantial decline in daily average prices can be attributed to the solar capacity expansion, this average price impact masks a substantial decrease in mid-day prices combined with an increase in shoulder hour prices. These results imply that short-term power markets are responding to the renewable expansion in a fashion that could sustain more flexible conventional generation, while seriously undermining the economic viability of traditional baseload generation technologies.

JEL-codes: L5 L94 Q41 Q42 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Note: EEE
References: Add references at CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.nber.org/papers/w24980.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:24980

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w24980

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().