Evaluating the Effect of Intermittent Renewables on the Wholesale Electricity Market in Germany
Abstract
For years, Germany has been a pioneer in the aggressive build out of intermittent
renewables (solar and wind). The Energy Concept launched in 2010, in conjunction with
previously established federal energy policies, has further enhanced Germany’s ability
to reach lofty renewable generation targets via ratepayer surcharges that support
feed-in tariffs. However, as the penetration of renewables has increased, wholesale
electricity prices have demonstrated a steady decline. Through statistical and market-based
analysis, this project 1) quantifies the price decrease that is caused by build out
of renewables, 2) examines the market mechanics that result in a price decrease, and
3) evaluates the effect of the price decrease on relevant electricity market participants.
Regression analysis indicates that average wholesale electricity prices will experience
a decrease of 6.5 €/MWh – 8.5 €/MWh by 2020, solely due to the build out of renewable
energy to comply with Energy Concept targets. Based on current electricity demand,
this price reduction will result in an annual revenue loss of €2.96 billion – €3.88
billion. Importantly, this revenue loss will not be distributed equally amongst wholesale
generators. Generators with higher marginal costs will be affected disproportionately
because the frequency with which they can be dispatched profitably will decrease more
than for cheaper generators. Specifically, this will hurt natural gas plants, many
of which will be phased out due to unfavorable economics. This loss of natural gas
plants will 1) present challenges to the grid’s ability to maintain stability while
introducing more intermittent renewables and 2) force Germany to remain reliant on
carbon-rich coal for electricity. The findings of this study are then applied to other
locations that are also pursuing aggressive renewable energy targets.
Type
Master's projectPermalink
https://hdl.handle.net/10161/8502Citation
Adelfio, Andrew (2014). Evaluating the Effect of Intermittent Renewables on the Wholesale Electricity Market
in Germany. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/8502.Collections
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