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The new merit order: The viability of energy-only electricity markets with only intermittent renewable energy sources and grid-scale storage

Werner Antweiler and Felix Muesgens

No 1064, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: What happens to the merit order of electricity markets when all electricity is supplied by intermittent renewable energy sources coupled with large-scale electricity storage? With near-zero marginal cost of production, will there still be a role for an energy-only electricity market? We answer these questions both analytically and empirically for electricity markets in Texas and Germany. What emerges in market equilibrium is the 'new merit order'. Our work demonstrates that as long as free entry and competition ensure effective price setting, an efficient new merit order emerges in electricity markets even when the grid is completely powered by intermittent sources with near-zero marginal costs. We find that energy only markets remain viable and functional.

Keywords: Renewable energy; energy storage; electricity markets (search for similar items in EconPapers)
JEL-codes: D47 L11 Q41 Q42 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env, nep-ind and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:282991

DOI: 10.4419/96973235

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