Evaluating the Effect of Intermittent Renewables on the Wholesale Electricity Market in Germany
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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.
CitationAdelfio, 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.
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Rights for Collection: Nicholas School of the Environment