PRICE VARIANCE IN EUROPEAN ELECTRICITY SPOT MARKETS – AN IMPACT ASSESSMENT OF INTERMITTENT RENEWABLE ENERGIES

摘要

OverviewLiberalization of electricity markets in the EU and a remarkable growth of intermittent renewable generation in thelast decade led to far-reaching price effects in Europe’s electricity spot markets. While the current literaturegenerally agrees on the reducing effect of intermittent renewable generation on the price level itself, the impact onthe price variance has not yet been fully analyzed. Differences in considered type of technology of renewablegeneration, market situation and time span lead to heterogeneous findings regarding the price variance in Europeanelectricity spot markets. Most studies that have been done on this topic conclude that price variance increases with anincreasing share of intermittent renewable generation. However, some authors show that increased shares ofintermittent renewable energies can as well decrease electricity price variance.Questions which are considered in this paper are:1. Which factors do generally have an influence on the variance of spot prices?2. Do spot prices become more fluctuating when higher shares of intermittent renewable energies are fed intothe grid?3. Which role does the generation of intermittent renewable energies play regarding the electricity spot pricevariance?MethodsFor answering those questions, two models - a theoretical and an empirical approach - are developed.Theoretical model:In a first methodical step, current literature on the question of price variance is analyzed. The most important impactfactors which are considered in comparable studies are the amount of intermittent renewable generation fed into thegrid, the variability of this generation, demand levels, and competitiveness of the market. Most studies concludingincreased price variance as a consequence of rising levels of intermittent renewable generation concentrate theiranalysis on wind power. The main basis of the theoretical model is a theoretical framework developed by Wozabal,Graf, & Hirschmann (2016). It identifies two main factors shaping price variance: distribution of residual demand,i.e. distribution of intermittent renewable generation, and shape of the supply curve.Empirical model:In a second methodical step, the theoretical model is tested in an empirical approach for Europe. It adds newevidence to the controversy by testing the hypothesis of two main influencing factors – the shape of the supply curveand the distribution of the residual demand - for the year 2015 in an econometric model for 23 countries in Europe.They equal 84 % of installed wind and photovoltaics capacities in the EU. A linear regression model identifies themost important factors shaping price variance. The analysis aims at testing the hypothesis in a broad range ofEuropean countries. This enables some general conclusions about electricity spot price variance in Europe like theyare already possible for the merit-order effect (Welisch, Ortner, & Resch, 2016).ResultsThe results show that there are two main influences impacting spot price variance which can be approved for themajority of countries analyzed: the variance of intermittent renewable generation on the one side, and time-wisecorrelation and interaction of demand and intermittent renewable generation on the other side. In the empiricalmodel, countries with an intermittent renewable energy share higher than 10 % are analyzed more in detail. Based onthe results of those countries, conclusions specifically for countries with a significant share of intermittent renewablegeneration can be drawn. The variance of the renewable production itself is a major driver for price variance in 67 %of those countries. Time-wise correlation and interplay of intermittent renewable generation and load show anegative impact on price variance in 77 % of those countries in Europe.The results allow for concluding remarks regarding the effect of the amount of intermittent renewable generation fedinto the grid. It can be shown that there is a quadratic influence of the average residual demand, i.e. the averageintermittent renewable generation, on the spot price variance. That means that very high as well as very low shares ofaverage intermittent renewable generation can increase price variance significantly. Moderate amounts ofintermittent renewable generation though can even lower price variance in the majority of those countries. As aconsequence, there exists a phase of lower price variance on the path towards higher renewable generation shares inmany countries. During this phase, price variance tends to be lower than at the beginning and towards the end of theexpansion of renewable generation shares. This time period can be determined for each country using the empiricalmodel.ConclusionsIn the current market design, price variance is an important trigger for investments to secure network stability likestorage facilities, demand-side management, and flexibility measures. With moderate levels of intermittent renewableenergies decreasing price variance in Europe, policy measures become necessary in addition to market-basedincentives to ensure investments during those times. Otherwise, a sustainable realization of renewable energy targetsmight be at risk since the results confirm as well that high shares of intermittent renewable energies increase the spotprice variance and require, therefore, those investments in network stability.