The marketability of variable renewable energy in liberalized electricity markets - An empirical analysis

The price effect of the rising share of renewable electricity, which is called 'merit-order-effect', leads to noticeable changes in the German power industry and debates about the electricity market design. This paper estimates the merit-order-effect induced by variable renewable energy in the German-Austrian electricity sector with a multivariate regression model. The research focus lies on the impact of the estimated effects on the marketability of variable renewable electricity generation. The results show a systematic decline of the average market revenues for wind and photovoltaic plants in the period from January 2011 to December 2013. Current market data shows a continuation of this trend into 2016. According to the German long term goals for the use of renewables, wind and solar power will play a crucial role in the future electricity generation mix. If investments in these technologies will be profitable without any regulatory remuneration mechanisms in addition to the market revenues, depends on the further cost degression and the development of the merit-order-effect. (C) 2017 Elsevier Ltd. All rights reserved.