Market value of variable renewables: The effect of solar and wind power variability on their relative price

Author: Hirth, Lion | Economics, Europe

Translate: FROM English | TO English

Abstract – This paper provides a comprehensive discussion of the market value of variable renewable energy (VRE). The inherent variability of wind speeds and solar radiation affects the price that VRE generators receive on the market (market value). During wind and sunny times the additional electricity supply reduces the prices. Because the drop is larger with more installed capacity, the market value of VRE falls with higher penetration rate. This study aims to develop a better understanding how the market value with penetration, and how policies and prices affect the market value. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and the calibrated model of the European electricity market EMMA. We find the value of wind power to fall from 110 percent of the average power price to 50-80 percent as wind penetration increases from zero to 30 percent of total electricity consumption. For solar power, similarly low values levels are reached already at 15 percent penetration. Hence, competitive large-scale renewables deployment will be more difficult to accomplish than many anticipate.

The variability of solar and wind power affects their market value.
The market value of variable renewables falls with higher penetration rates.
We quantify the reduction with market data, numerical modeling, and a lit review.
At 30% penetration, wind power is worth only 50-80% of a constant power source.

Lion Hirth, Vattenfall and Potsdam-Institute for Climate Impact Research

Energy Policy 2013; 38: 218–236. doi: 10.1016/j.eneco.2013.02.004

Download original document: “The market value of variable renewables: The effect of solar and wind power variability on their relative price”

This material is the work of the author(s) indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this material resides with the author(s). As part of its noncommercial educational effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Queries e-mail.

Wind Watch relies entirely
on User Funding

(via Stripe)

(via Paypal)

Share:

[ Short URLs: https://wind-watch.org/doc/?p=5139 | http://wndfo.net/D5139 ]