effects of renewables on the stylized facts of electricity prices abstract many countries around the world have increased their renewable installed capacity due to a greater awareness of climate concerns under this new framework with renewables being among the main generation sources the literature warns of a dramatic change in price behaviour some of the most commonly claimed effects of having a significant proportion of renewable generating sources in the total electricity production mix include i a systematic decrease in overall wholesale market prices ii a higher occurrence of price jumps and iii a significant increase in price volatility the goal of the present study is to test whether these changes in price behaviour have actually come about to do so we focus on the spanish day ahead electricity market as a paradigmatic example in line with the literature it is found a statistically negative relationship between the renewable generation share and the day ahead market marginal prices as well we have obtained statistical confirmation of the fact that renewables generation share volatility is transferred to price volatility though similarly to other generation technologies finally in contrast to the general belief that the introduction of renewable generation would give rise to extreme positive prices according to our results increases in renewables generation share reduce the probability of upward jumps in prices the results obtained are of interest for portfolio managers practitioners and regulators

wind power in the danish liberalised power market policy measures price impact and investor incentives wind power has a strong position at the danish electricity market mainly caused by high feed in tariffs in the 1990s investments in new wind power installations on land however have declined dramatically after the danish electricity market was liberalised in 1999 first the paper describes how policy measures directed towards wind power have been redesigned to match the liberalised market then we estimate the impact of the redesigned tariffs on the electricity prices finally we assess whether the new tariffs make an incentive to invest in wind power the paper concludes that the new tariffs not by itself make evidence for the actual danish recession in new wind power installations after the electricity reform the main causes could include a combination of problems in spatial planning high risk aversion of new wind turbine investors and perhaps more favourable support schemes in other countries

investment specific technological changes the source of long run tfp fluctuations abstract technological innovations originating in the capital producing sector may spillover to the rest of the economy and enhance aggregate tfp in the long run this paper assesses the quantitative importance of investment specific technological changes in long run movements in aggregate tfp to this end we construct a two sector business cycle model where an ist diffusion process influences long run movements in aggregate tfp via spillover we then establish the linkage between the primitive shocks of the model and two shocks that can be identified from a var approach one shock accounting for the long run movement in aggregate tfp and the other accounting for the long run movement in the inverse of the relative price of investment we show analytically that the correlation of these two long run shocks can be fruitful in distinguishing the quantitative importance of ist innovations in long run movements in aggregate tfp using post war u s data we find that these two long run shocks identified by the mfev approach are almost perfectly collinear moreover these two shocks can explain a significant and surprisingly similar fraction of the business cycle fluctuations in other important macro variables our findings suggest that embodied technological changes are an important driver of long run movements in aggregate tfp

the merit order effect of wind and river type hydroelectricity generation on turkish electricity prices abstract the environmental concerns and dependency on gas imports push turkish policy makers to find ways of increasing the share of renewable sources in electricity generation providing incentives for renewable energy in the form of feed in tariffs is one of the measures to achieve this goal basing on the data of turkish electricity market operator we quantified the magnitude of the price effects of wind and river type hydro generations on hourly average of day ahead prices we find that wind and river type hydro plants reduced the spot electricity prices during the period of 2012 2017 and despite these resources get the same incentives their impacts on the spot prices and price volatility are different this can be useful for a more comprehensive cost benefit analysis aimed at differentiating incentive schemes the paper also discusses possible underlying reasons of these different impacts such as high seasonality of hydro generation and volatility of wind generation finally we show that assuming more than 75 of the price reductions were reflected into the consumer prices in turkey the net impact of wind and river type hydro generation on final consumer prices would be negative this finding contributes to the discussions on renewable energy incentive mechanisms

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

diffusion of technical change and the decomposition of output into trend and cycle in this paper we argue that modelling the trend component in real gnp as a random walk is inconsistent with its interpretation as productivity growth as an alternative we specify the trend as an arima whose impulse response function follows an s shaped pattern reflecting the process of diffusion of technical change such an arima is employed to build and estimate an ucarima using usa postwar quarterly data we find that our model although more parsimonious fits the data equally well than the standard random walk plus ar 2 cycle moreover our model has a very low cycle trend variance ratio

assessing the determinants of household electricity prices in the eu a system gmm panel data approach abstract a meaningful portion of the consumer basket of european households and companies is embodied by electricity as well as gas or refined petroleum products as energy products are essential inputs of nearly all final goods and services whichever change of energy prices has a direct impact of the general price level in this context the main purpose of this study is to assess the main drivers of household electricity prices in the european union eu throughout a period of deep sector transformation relying on eurostat data not only we analyze the long term progress of household electricity prices across the eu but also we provide empirical evidence on their determinants while confronting the results with the eu energy policy path for this purpose a firsthand approach is herein developed based on a dynamic model with panel data through gmm proposal method by blundell and bond 1998 4 with the windermeijer 2005 41 correction the data analysis provides grounds for a relation between the variable of household electricity prices with variables related to sector liberalization renewable energy sources which support the eu policy to boost liberalization this study offers evidence that the sector liberalization is accompanied by a decreasing trend in prices which is consistent with the european commission s objectives to liberalize

economics of pooling small local electricity prosumers lcoe self consumption abstract the arrival of small scale decentralized energy installations coincides with the emergence of so called prosumers entities households that are producer and consumer of energy in one this research focuses on an electricity prosumer model in the context of the uk market levelized cost of electricity lcoe for photovoltaic pv and wind energy will be modeled for six uk sites additionally self consumption levels for two different load profiles and technologies will be estimated per site the simulations are modeled with homer software and multiple inputs will be varied including natural resource equipment cost maintenance cost equipment life expectancy cost of capital project life and load profiles the modeled self consumption levels show significant differences and varied between 31 and 72 depending on load profile itself and re technologies mixes modeled the pooling of prosumers implied by lower load profile volatility proved to be beneficial to self consumption levels in the modeled scenarios up to 17 6 lcoe showed significant ranges depending on the input parameters and their combination 10 55 p kw h for pv and 2 19 p kw h for wind the combination of these factors is decisive for the final lcoe and the negative effects of less benign factors can be compensated by other parameters when compared to current electricity retail prices of around 15 p kw h around 97 of wind sites and around 4 of pv scenarios implied lcoe reached grid parity the self consumption levels and lcoe analysis indicate the viability of electricity prosumer models

the influence of temperature on spike probability in day ahead power prices it is well known that day ahead prices in power markets exhibit spikes and time varying volatility spikes and extremely high volatility are the results of short term frictions in demand and or supply conditions it is known that information on load or the reserve margin help to forecast spikes however these variables are not timely available for every market participant and this paper suggests to use temperature as a proxy interpreting the results from several switching regimes models the paper shows that the probability of spike occurrence increases when temperature deviates substantially from mean temperature levels

fair demographic risk sharing in defined contribution pension systems in this article we formulate and solve the optimal design problem of a defined contribution public pension fund in a highly stylized but still rather general non stationary framework we adopt the viewpoint of a benevolent social planner who aims at treating in a fair manner the successive overlapping generations participating to such a long term mandatory system using the approach of el karoui and jeanblanc 1998 for the optimal consumption and portfolio choice problem with random income in a complete market we exhibit a solution to our intertemporal stochastic control problem where each generation receives a fair lumpsum retirement benefit it is proportional to the contributions she has paid during her active worklife and follows a fixed common rule although her pension value itself may depend on variables only observable at her retirement time we next relax the assumption that the collective pension system is mandatory and investigate the performance of individual investment plans in the market comparing the outcomes of both alternatives we derive a condition under which the collective fund can be expected to overperform the individual plan in the special case of a stationary economy such a possibility has been pointed out by gollier 2008 in fact this effect results from the possibility for the collective fund to borrow today against contributions of future generations which allows to implement riskier strategies and may improve its performance

greener more integrated and less volatile a quantile regression analysis of italian wholesale electricity prices abstract this paper provides estimates of quantile regression models of the relationship between italian day ahead electricity prices the supply of renewables and the inception of a new cable sapei linking sardinia with the italian peninsula in the 2006 2015 time window the results confirm the merit order effects detected in the existing literature both for photovoltaics and wind power more strongly in market conditions characterised by moderately low price levels and with some implied increase in volatility the new cable has apparently challenged the ability of power generating companies to extract value through price spikes has mitigated volatility and its effects have been complementary with those of renewables effects from photovoltaics are more sensitive to robustness checks differences across zonal markets are nonetheless detected

winds of change how high wind penetrations will affect investment incentives in the gb electricity sector abstract wind power is widely expected to expand rapidly in britain over the next decade large amounts of variable wind power on the system will increase market risks with prices more volatile and load factors for conventional thermal plant lower and more uncertain this extra market risk may discourage investment in generation capacity financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind increased price risk will also make investment in other forms of low carbon generation e g nuclear power more challenging a number of policies can reduce the extent to which generators are exposed to market risks and encourage investment however market risks play a fundamental role in shaping efficient investment and dispatch patterns in a liberalised market therefore measures to improve price signals and market functioning such as a stronger carbon price and developing more responsive demand are desirable however the scale of the investment challenge and increased risk mean targeted measures to reduce although not eliminate risk exposure such as capacity mechanisms and fixed price schemes may have increasing merit the challenge for policy is to strike the right balance between market and planned approaches

revisions in utilization adjusted tfp and robust identification of news shocks this paper documents large revisions in a widely used series of utilization adjusted total factor productivity tfp by fernald 2014 and shows that these revisions can materially affect empirical

electricity prices large scale renewable integration and policy implications abstract this paper investigates the effects of intermittent solar and wind power generation on electricity price formation in germany we use daily data from 2010 to 2015 a period with profound modifications in the german electricity market the most notable being the rapid integration of photovoltaic and wind power sources as well as the phasing out of nuclear energy in the context of a garch in mean model we show that both solar and wind power granger cause electricity prices that solar power generation reduces the volatility of electricity prices by scaling down the use of peak load power plants and that wind power generation increases the volatility of electricity prices by challenging electricity market flexibility

drivers of electricity price dynamics comparative analysis of spot and futures markets abstract against the backdrop of numerous evidence that variable renewable generation decreases electricity prices and increases price volatility this paper assesses the drivers of electricity prices in spot and futures markets focusing on the german electricity markets we take into account nonlinearities in electricity prices by means of structural breaks and threshold regressions we find that short run and medium long run price drivers differ and more importantly that they vary over time in the case of the spot market the determinants of prices are renewable infeed and electricity demand while in the futures market the main drivers are natural gas coal and carbon prices our results give relevant insights for market participants who seek to optimize procurement selling strategies in the spot market and use the futures market to hedge against spot price volatility which has increased due to a higher renewable generation

an analysis of the decline of electricity spot prices in europe who is to blame abstract the european electricity markets are going through a phase of agitating transition which is shaped by different key factors such as the expansion of renewable energies the changes in the eu carbon trading scheme and the european market integration in addition markets are affected by the volatile prices of primary energy carriers e g gas and coal the development of these different factors led to a decline of german wholesale electricity prices of almost 40 from about 51 mwh in 2011 to 31 mwh in 2015 the goal of this study is to analyze the contribution of different price drivers to this decline thus an agent based modeling and a regression approach are applied to investigate the effect of price drivers and to verify model results by comparing both approaches our results show that against the public perception the impact of carbon and coal prices on german electricity prices has been twice as high as the renewable expansion between 2011 and 2015 furthermore if carbon and coal prices do not recover to at least the level of 2011 electricity prices will remain on the current low level complicating the economic operation of gas power plants

the impact of intermittently renewable energy on italian wholesale electricity prices additional benefits or additional costs abstract most studies of the literature find that the development of renewable energy sources determines a decrease in the wholesale prices some authors use this finding to state that the current subsidies for renewable technologies cannot be considered as excessive by carrying out a hybrid analysis both simulation and ex post empirical analyses of the case of photovoltaic energy in italy this article demonstrates that this result cannot be generalised under market power an increase in pv production can provide benefits in terms of a wholesale price decrease only beyond a specific threshold and especially if combined with other effects otherwise it is likely that pv development could imply an increase in prices therefore on the one hand caution is necessary when using the estimated change in wholesale prices to evaluate the net cost for consumers of the supporting policies for renewables either the simulation based models or the full empirical analyses may be misleading on the other hand if decarbonisation is the main objective the energy policies should be designed in order to assure a deep and balanced penetration of the clean technologies regardless of their estimated transitory impact on wholesale prices and in the meantime reviewing the organisation of power markets

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

renewable generation and electricity prices taking stock and new evidence for germany and austria abstract economic theory predicts that the increase of renewable electricity production should reduce the price of electricity in the short run which is also known as the merit order effect although the merit order effect is only one of several consequences of renewable production on the electricity system it is crucial to determine its size for the economic evaluation of renewable energies in this paper we present a comprehensive overview of relevant past research results on the price effect of renewables additionally we conduct a new empirical analysis of the price effect of renewable production for the austrian german region a market that clearly qualifies for a merit order effect analysis given its characteristics based on the review and our own analysis we show that the merit order effect varies depending on the region and the assessment method chosen we also find that the size of this effect is less dispersed throughout different markets than previously suggested by the literature

do tfp and the relative price of investment share a common i 1 component abstract results from cointegration tests clearly suggest that tfp and the relative price of investment rpi are not cointegrated evidence on the alternative possibility that they may nonetheless contain a common i 1 component generating long horizon co variation between them crucially depends on the fact that i structural breaks are or are not allowed for and ii the precise nature and timing of such breaks not allowing for breaks evidence points towards the presence of a common component inducing positive long horizon covariation which is compatible with the notion that the technology transforming consumption goods into investment goods is non linear and the rpi is also impacted upon by neutral shocks allowing for breaks evidence suggests that long horizon covariation is either nil or negative assuming for illustrative purposes that the two series contain a common component inducing negative long horizon covariation evidence based on structural vars shows that this common shock i plays an important role in macroeconomic fluctuations explaining sizeable fractions of the forecast error variance of main macro series and ii generates disinflationary booms characterized by transitory increases in hours and decreases in inflation

the danish green certificate system some simple analytical results we formulate a simple static equilibrium model for the electricity market taking account of both green certificates and co2 emission permits the objective is to investigate the relationship between these markets under the existence of upper and lower price bounds on the green certificates both in the short and in the long run we perform various comparative static changes of the parameters of the model and study how these affect the endogenous variables of the model as well as producers and consumers surplus we also investigate the effects of imports and exports of electricity several comparative static results are derived and in particular it is shown that harsher co2 emission constraints and increased import wholesale price both may lead to reduced capacity of green electricity

quantifying the effect of renewable generation on day ahead electricity market prices the spanish case abstract the penetration of renewable generation has grown since the electricity sector has been deregulated to account for that this paper proposes a methodology to estimate the downward effect of renewable generation participation upon the day ahead electricity market prices since such an effect is quite intuitive observing the merit order of the generating units the european electricity market matching algorithm emma is currently based on euphemia price coupling of regions though there are several differences among countries across europe the new algorithm proposed uses market orders which include aggregate hourly orders such as aggregate supply and demand curves these orders are simple orders and the marginal price is affected by complex orders especially by the minimum income condition mic used in the iberian electricity market and considered in our proposed algorithm a case study of the spanish day ahead electricity market is evaluated for 2015 for which a daily generation sample is composed of 16 days in 2015 the sample is created following the characteristics of thermal production renewable production and inframarginal production the conclusions are drawn comparing the simulations of the real marginal prices and the new marginal prices after incorporating renewable generation participation into the aggregate demand curve at the maximum price

news shocks and the slope of the term structure of interest rates abstract we adopt a statistical approach to identify the shocks that explain most of the fluctuations of the slope of the term structure of interest rates we find that one shock can explain the majority of unpredictable movements in the slope impulse response functions lead us to interpret this shock as news about future total factor productivity tfp by showing that slope shocks are essentially tfp news shocks we provide a new explanation for the relationship between the slope and macroeconomic fundamentals our results also provide a new empirical benchmark for structural models at the intersection of macroeconomics and finance jel e23 e43 e52 g12 g14

on the market impact of wind energy forecasts this paper presents an analysis of how day ahead electricity spot prices are affected by day ahead wind power forecasts demonstration of this relationship is given as a test case for the western danish price area of the nord pool s elspot market impact on the average price behaviour is investigated as well as that on the distributional properties of the price by using a non parametric regression model to assess the effects of wind power forecasts on the average behaviour the non linearities and time variations in the relationship are captured well and the effects are shown to be quite substantial furthermore by evaluating the distributional properties of the spot prices under different scenarios the impact of the wind power forecasts on the price distribution is proved to be considerable the conditional price distribution is moreover shown to be non gaussian this implies that forecasting models for electricity spot prices for which parameters are estimated by a least squares techniques will not have gaussian residuals hence the widespread assumption of gaussian residuals from electricity spot price models is shown to be inadequate for these model types the revealed effects are likely to be observable and qualitatively similar in other day ahead electricity markets significantly penetrated by wind power

pre announcement effects news effects and volatility monetary policy and the stock market abstract i examine pre announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions the results suggest that the stock market tends to be relatively quiet conditional volatility is abnormally low on days preceding regularly scheduled policy announcements although this calming effect is routinely reported in anecdotal press accounts it is statistically significant only over the past four to five years a result that i attribute to changes in the federal reserve s disclosure practices in early 1994 the paper also looks at how the actual interest rate decisions of policy makers affect stock market volatility the element of surprise in such decisions tends to boost stock market volatility significantly in the short run and positive surprises higher than expected values of the target federal funds rate tend to have a larger effect on volatility than negative surprises the implications of the results for broader issues in the finance and economics literatures are also discussed

social security and intergenerational redistribution a generational accounting perspective this paper is concerned with the analysis of intergenerational redistribution in a pay as you go financed social security scheme instead of annual fiscal indicators we apply generational accounts to calculate the intertemporal effects arising from a projected aging process as a case study the institutional settings and the parameterization of our model refer to the conditions found in germany in 1989 additionally the intergenerational impacts of the german 1992 pension reform act are taken into account our findings suggest that the major reform measures affect the distribution of the demographic burden between future and presently living generations however the burden is shifted in favor of the generations currently alive thereby contradicting the explicit political intentions and aggravating the situation for future generations

costs and benefits of the renewable production of electricity in spain abstract the reduction of pollutant emissions and greenhouse gases as well as the strong energy dependence on fossil fuels gas and fuel oil have among other reasons led many countries in recent years to develop policies to promote and encourage the use of alternative sustainable clean and predictable sources of energy this paper presents an overview of the production of electricity from renewable sources pe res in spain and offers an outline of the current level of development of renewable energy it also reviews the current support system the costs of integrating renewable energy into the electric system as well as the effects of this type of energy on the electricity wholesale market price the gross domestic product gdp the environment human health and employment

reducing the market impact of large shares of intermittent energy in denmark abstract the increasing prevalence of renewable and intermittent energy sources in the electricity system is creating new challenges for the interaction of the system in denmark high renewable shares have been achieved without great difficulty mainly due to the flexibility of the nearby nordic hydro power dominated system further increases in the share of renewable energy sources require that additional options are considered to facilitate integration with the lowest possible cost with large shares of intermittent energy the impact can be observed on wholesale prices giving both lower prices and higher volatility a lack of wind that causes high prices is rarely seen because long periods without wind are uncommon therefore we focus on the low price effects and the increased value of flexible demand options on the supply side there is an increase in the value of other flexible generation technologies and the attractiveness of additional interconnection capacity this paper also analyses options for increasing the flexibility of heat generation involving large and decentralized chp plants and heat generation based on electricity the incentives that the market provides for shifting demand and using electricity for heat production are discussed based on the variability of prices observed from 2006 to 2008

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

parametric pension reform with higher retirement ages a computational investigation of alternatives for a pay as you go based pension system abstract this paper discusses parametric reform options to control losses generated by a publicly managed pay as you go payg pension system under alternative deficit reduction reform strategies involving changes in contribution and replacement rates and statutory retirement ages two different problems corresponding to different pension reform strategies are considered using computational techniques the techniques are illustrated through exercises employing data for the financially troubled pension system in turkey

empirical analysis of the merit order effect and the missing money problem in power markets with high res shares an on going debate in the energy economics and power market community raises the question if energy only power markets are increasingly failing due to growing feed in shares from subsidized renewable energy sources res the argument being essentially that the merit order effect of res production depresses day ahead spot market prices which in turn creates a situation where power plant owners cannot recover investment costs missing money problem we argue in short that energy only power markets are not failing in principle but are rather facing several market distortions that hinder proper market functioning namely 1 the gap between the electricity volume actually traded at day ahead spot markets versus the overall electricity consumption and 2 the regulatory assumption that variable res generation i e wind and photovoltaic pv truly has zero marginal operation and grid integration costs in this paper we show that both effects over amplify the well known merit order effect of res power feed in and indirectly also the missing money problem beyond a level that is explainable by underlying physical realities we empirically analyze the impacts of wind and pv power feed in on the day ahead market for the epex german austrian market zone a region that is already today experiencing significant feed in tariff fit subsidized res power feed in ca 20 fit share our analysis shows that if necessary regulatory adaptations are taken i e increasing the spot market s share of overall load demand and using the true marginal costs of res units in the merit order energy based power markets remain functional despite high res power feed in

assessing the impact of wind generation on wholesale prices and generator dispatch in the australian national electricity market abstract growing climate change and energy security concerns are driving major wind energy deployment in electricity industries around the world despite its many advantages growing penetrations of this highly variable and somewhat unpredictable energy source pose new challenges for electricity industry operation one issue receiving growing attention is the so called merit order effect of wind generation in wholesale electricity markets wind has very low operating costs and therefore tends to displace higher cost conventional generation from market dispatch reducing both wholesale prices and conventional plant outputs this paper extends the current literature on this effect through an empirical study employing a range of econometric techniques to quantify the impacts of growing wind penetrations in the australian national electricity market nem the results suggest that wind is having a marked impact on spot market prices and while wind is primarily offsetting higher operating cost gas generation it is now also significantly reducing dispatch of emissions intensive brown coal generation great care needs to be taken in extrapolating these results to longer term implications however the study does propose a methodology for assessing this effect highlights the impacts that wind is already having on nem outcomes and suggests promising directions for future research

futures trading information and spot price volatility evidence for the ftse 100 stock index futures contract using garch abstract this paper examines the impact of trading in the ftse 100 stock index futures on the volatility of the underlying spot market to examine the relationship between information and volatility as subject neglected in previous studies the garch family of techniques is used the results suggest that futures trading has led to increased volatility but that the nature of volatility has not changed post futures the finding of price changes being integrated pre futures but being stationary post futures implies that the introduction of futures has improved the speed and quality of information flowing to the spot market

an empirical comparison of alternate regime switching models for electricity spot prices one of the most profound features of electricity spot prices are the price spikes markov regime switching mrs models seem to be a natural candidate for modeling this spiky behavior however in the studies published so far the goodness of fit of the proposed models has not been a major focus while most of the models were elegant their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored with this paper we want to fill the gap we calibrate and test a range of mrs models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well we find that the most universal and robust structure is that of an independent spike 3 regime model with heteroscedastic diffusion type base regime dynamics and shifted spike regime distributions

product innovation and the business cycle micreconomic data show two important facts about new products first some products are more important than others second it takes them years to penetrate the market significantly the authors calibrated model with these features overpredicts the autocovariance of u s gnp at long lags but underpredicts it at short lags the latter is not surprising since the model leaves out other obvious high frequency shocks the puzzle is why the u s gnp data do not show stronger autocorrelation at higher lags a surprising finding is that while the speed of diffusion has huge level effects it plays a minor role in shaping the business cycle copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

stochastic technical progress smooth trends and nearly distinct business cycles this paper studies a model of random technical progress where technology diffuses at realistically slow rates it fits smooth trends to the sum of gdp series generated by this model and series representing transitory or cyclical fluctuations detrended gdp is then largely unrelated to technical progress the detrending method proposed by rotemberg 1999 reconstructs cyclical variations somewhat more accurately than the hp filter with sufficiently slow diffusion it is also more accurate than a method based on vars fitted to hours and gdp growth consistent with the model s predictions permanent shocks initially depress both hours and output in these vars

nonlinear time series modelling an introduction recent developments in nonlinear time series modelling are reviewed three main types of nonlinear model are discussed markov switching threshold autoregression and smooth transition autoregression classical and bayesian estimation techniques are described for each model parametric tests for nonlinearity are reviewed with examples from the three types of model finally forecasting and impulse response analysis is developed

retrospective modeling of the merit order effect on wholesale electricity prices from distributed photovoltaic generation in the australian national electricity market in electricity markets that use a merit order dispatch system generation capacity is ranked by the price that it is bid into the market demand is then met by dispatching electricity according to this rank from the lowest to the highest bid the last capacity dispatched sets the price received by all generation ensuring the lowest cost provision of electricity a consequence of this system is that significant deployments of low marginal cost electricity generators including renewables can reduce the spot price of electricity in australia this prospect has been recognized in concern expressed by some coalfired generators that delivering too much renewable generation would reduce wholesale electricity prices in this analysis we calculate the likely reduction of wholesale prices through this merit order effect on the australian national electricity market we calculate that for 5 gw of capacity comparable to the present per capita installation of photovoltaics in germany the reduction in wholesale prices would have been worth in excess of a 1 8 billion over 2009 and 2010 all other factors being equal we explore the implications of our findings for feed in tariff policies and find that they could deliver savings to consumers contrary to prevailing criticisms that they are a regressive form of taxation

how does germany s green energy policy affect electricity market volatility an application of conditional autoregressive range models abstract based on a dynamic model for the high low range of electricity prices this article analyses the effects of germany s green energy policy on the volatility of the electricity market using european energy exchange data from 2000 to 2015 we find rather high volatility in the years 2000 2009 but also that the weekly price range has significantly declined in the period following the year 2009 this period is characterised by active regulation under the energy industry law enwg the eu emissions trading directive etd and the renewable energy law eeg in contrast to the preceding period price jumps are smaller and less frequent especially for day time hours implying that current policy measures are effective in promoting renewable energies while simultaneously upholding electricity market stability this is because the regulations strive towards a more and more flexible and market oriented structure which allows better integration of renewable energies and supports an efficient alignment of renewable electricity supply with demand

why do electricity prices jump empirical evidence from the nordic electricity market the paper empirically explores the possible causes behind electricity price jumps in the nordic electricity market nord pool a time series model a mixed garch earji jump model capturing the com

the renewable energy policy paradox abstract one major avenue for policymakers to meet climate targets is by decarbonizing the power sector one component of which is raising the share of renewable energy sources renewables in electricity generation however promoting renewables in liberalized power markets creates a paradox in that successful penetration of renewables could fall victim to its own success with the current market architecture future deployment of renewable energy will necessarily be more costly and less scalable moreover transition towards a full 100 renewable electricity sector is unattainable paradoxically in order for renewable technologies to continue growing their market share they need to co exist with fossil fuel technologies ignoring these findings can slow adoption and increase the costs of deploying new renewable technologies this paper spots the incompatibility between electricity liberalization and renewable policy regardless of the country location or renewable technologies the paradox holds as long as market clear prices with short term marginal costs and renewable technology s marginal cost is close to zero and not dispatchable

interactions between the power and green certificate markets abstract the current trend of liberalising the power markets is combined with ambitious deployment plans for power production based on renewable energy supplies a new policy scheme to ensure this extension has been developed in the form of a green certificate system with a politically determined target of deployment in such a system producers of renewably based electricity receive tradable certificates in proportion to the electricity they produce the producer can thereby sell these certificates and receive additional revenue apart from the power price this paper studies the price and consumption effects of such a system with a simple model we show that the effects are ambiguous this ambiguity is caused by the interaction between the two markets therefore the green certificate system is difficult to manage if the state has parallel energy targets such as a desired deployment of renewably based energy and a stabilisation or reduction of the energy consumption in addition this complicates the regulation through a deployment target of renewably based power production as the regulator has to be aware of the different effects which follow a specific target until now these effects have not been considered in the analyses of the green certificate system when introducing the system even though it might have considerable consequences for the success of the system

distributional costs of wind energy production in portugal under the liberalized iberian market regime abstract wind generation in portugal and spain has grown due to a decrease in technology cost and the availability of renewables electricity generation incentives there is a strong interconnection between spain s and portugal s transmission systems resulting in common prices in both countries however portuguese and spanish producers receive the incentives for producing wind based electricity that are specified in their own national policies resulting in different costs to rate payers in this paper we estimate the costs to portuguese rate payers associated with the current market design and policy incentives to do so we regress hourly spot electricity market prices as a function of hourly wind generation and estimate the resulting feed in tariff costs distributional effects over the various rate payer categories total costs for rate payer are at the minimum level if joint wind generation in portugal and spain increases by 5 5 from what it is today if wind generation increases much further then the costs increase due to the fit overcost increase if wind generation decreases from current levels then costs also increase due to the merit order effect furthermore we find that rate payer categories will endure different portions of the costs with an increase in wind generation penalizing predominantly 20 7 kva rate payers

pros and cons of exposing renewables to electricity market risks a comparison of the market integration approaches in germany spain and the uk abstract the article examines how renewable electricity res e producers are integrated into the electricity market under the support legislations and regulatory frameworks of germany spain and the uk focus is on wind power which faces the highest market integration challenge of all res e the analysis shows that the three countries follow contrasting approaches of exposing res e producers to the market risks of forward electricity markets balancing markets and system planning requirements risk exposure is highest in the uk and lowest in germany from a policy maker s perspective there is a trade off between a high risk and a low risk approach when res e face high market risks a higher level of financial support is required to stimulate res e development than in a low risk environment but the exposure to market risks may also give an incentive to make efficient use of the respective market thus limiting the indirect costs to society the special characteristics of wind energy however put natural limits to the response of wind power plants to market prices and locational price signals and will increasingly influence electricity markets and grid infrastructure these interdependencies should be recognised in the design of res e policies and market regulations

merit order effects of renewable energy and price divergence in california s day ahead and real time electricity markets abstract we answer two policy questions 1 what are the estimated merit order effects of renewable energy in the california independent system operator s caiso s day ahead market dam and real time market rtm and 2 what causes the hourly dam and rtm prices to systematically diverge the first question is timely and relevant because if the merit order effect estimates are small california s renewable energy development is of limited help in cutting electricity consumers bills but also has a lesser adverse impact on the state s investment incentive for natural gas fired generation the second question is related to the efficient market hypothesis under which the hourly rtm and dam prices tend to converge using a sample of about 21 000 hourly observations of caiso market prices and their fundamental drivers during 12 12 2012 04 30 2015 we document statistically significant estimates p value 0 01 for the dam and rtm merit order effects this finding lends support to california s adopted procurement process to provide sufficient investment incentives for natural gas fired generation we document that the rtm dam price divergence partly depends on the casio s day ahead forecast errors for system loads and renewable energy this finding suggests that improving the performance of the caiso s day ahead forecasts can enhance trading efficiency in california s dam and rtm electricity markets

the plunge in german electricity futures prices analysis using a parsimonious fundamental model abstract the german market has seen a plunge in wholesale electricity prices from 2007 until 2014 with base futures prices dropping by more than 40 this is frequently attributed to the unexpected high increase in renewable power generation using a parsimonious fundamental model we determine the respective impact of supply and demand shocks on electricity futures prices the used methodology is based on a piecewise linear approximation of the supply stack and time varying price inelastic demand this parsimonious model is able to replicate electricity futures prices and discover non linear dependencies in futures price formation we show that emission prices have a higher impact on power prices than renewable penetration changes in renewables demand and installed capacities turn out to be similarly important for explaining the decrease in operation margins of conventional power plants we thus argue for the establishment of an independent authority to stabilize emission prices

the merit order effect in the italian power market the impact of solar and wind generation on national wholesale electricity prices abstract italy promoted one of the most generous renewable support schemes worldwide which resulted in a high increase of solar power generation we analyze the italian day ahead wholesale electricity market finding empirical evidence of the merit order effect over the period 2005 2013 an increase of 1 gwh in the hourly average of daily production from solar and wind sources has on average reduced wholesale electricity prices by respectively 2 3 mwh and 4 2 mwh and has amplified their volatility the impact on prices has decreased over time in correspondence with the increase in solar and wind electricity production we estimate that over the period 2009 2013 solar production has generated higher monetary savings than wind production mainly because the former is more prominent than the latter however in the solar case monetary savings are not sufficient to compensate the cost of the related supporting schemes which are entirely internalized within end user tariffs causing a reduction of the consumer surplus while the opposite occurs in the case of wind

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

solar feed in tariffs and the merit order effect a study of the german electricity market abstract this study investigates the merit order effect moe of the recent years implementation of solar power in germany market clearing electricity prices and production levels are compared for the years 2009 2011 and a model for the relationship between the electricity price and price sensitive electricity production is developed and applied to predict electricity prices in germany from july 2010 to july 2011 with and without solar electricity generation seg the results show that the seg has caused a 7 reduction in average electricity prices for this period the average daily maximum price and daily price variation are also found to decrease by 13 and 23 respectively when taking the moe into account the net consumer s cost of the solar feed in tariff fit system is found to be 23 less than the charge listed in the electricity bill the german fit policy for solar power has been subject to considerable public debate and a common argument brought up in disfavor of the system is the high cost for the consumers in this study we demonstrate the importance of including the moe when evaluating the total costs and benefits of the fit policy mechanism

futures trading and volatility in the gnma market futures markets for agricultural commodities have existed for well over 100 years recently there has been a major expansion of futures trading into nontraditional areas particularly interest bearing securities and foreign currenciesthe so called financial futures the introduction of exchange traded futures contracts for treasury bills gnma pass through certificates and other securities has created new hedging arbitrage and speculative opportunities for the investors issuers and dealers who are active in the cash markets for these securities futures trading has also opened these markets to participation by new classes of traders particularly private and smaller institutional investors through the process of arbitrage a financial futures market will be closely linked to the cash market for the underlying securities an important concern of the regulatory authorities is what effect opening a futures market is likely to have on an existing cash market the purpose of this paper is to analyze the impact of futures trading in government national mortgage association gnma passthrough certificates on price volatility in the cash market for these securities there are several major ways in which opening futures trading can increase efficiency and smooth price variations in a cash market most importantly futures provide a mechanism for those who buy and sell the actual security or commodity to hedge themselves against unfavorable price changes through the futures market risk can be spread across a large number of investors and transferred away from those hedging spot positions to professional speculators who are more willing and able to bear it this risk transfer may substantially improve the functioning of the spot market because it reduces the need to incorporate risk premia in cash market transactions to compensate for the risk of price fluctuations second futures market may increase the informational efficiency of a cash market since futures prices are determined in a unified highly visible market by traders who specialize in gathering and evaluating information the futures market is expected to be an efficient market in the sense that prices will reflect the best estimate of true future values given the information currently available if anything an informationally efficient futures market should lead to more efficient pricing in the cash market the importance of both of these effects will depend upon the structure of the existing cash market the more developed and integrated is the cash market the

lower electricity prices and greenhouse gas emissions due to rooftop solar empirical results for massachusetts abstract monthly and hourly correlations among photovoltaic pv capacity utilization electricity prices electricity consumption and the thermal efficiency of power plants in massachusetts reduce electricity prices and carbon emissions beyond average calculations pv utilization rates are highest when the thermal efficiencies of natural gas fired power plants are lowest which reduces emissions of co 2 and ch 4 by 0 3 relative to the annual average emission rate there is a positive correlation between pv utilization rates and electricity prices which raises the implied price of pv electricity by up to 10 relative to the annual average price such that the average mwh reduces electricity prices by 0 26 1 86 per mwh these price reductions save massachusetts rate payers 184 million between 2010 and 2012 the current and net present values of these savings are greater than the cost of solar renewable energy credits which is the policy instrument that is used to accelerate the installation of pv capacity together these results suggest that rooftop pv is an economically viable source of power in massachusetts even though it has not reached socket parity

revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in australia this paper investigates the effect of increasing the number of wind turbine generators on wholesale spot prices in the australian national electricity market s nem given the existing transmission grid from 2014 to 2025 we use a sensitivity analysis to evaluate the effect of five different levels of wind power penetration on prices ranging from scenario a no wind to scenario e that includes existing and planned wind power sufficient to meet australia s original 2020 41twh large scale renewable energy target lret we find divergence in prices between states and similar prices for nodes within states this supports the garnaut climate change review assessment on the prevalence of gold plating the intrastate transmission network and underinvesting in interstate connectivity we find that increasing wind power penetration decreases wholesale spot prices but that retail prices have increased in deregulated south australia and queensland similarly in victoria we argue that there is a pressing need to split the large generator retail companies into separate retail and generator companies and to reassess regulatory rules more generally interconnector congestion limits the potential for wind power to further reduce wholesale prices across the nem so the need for a high capacity transmission backbone in the nem is becoming clearer and will become pressing when australia moves beyond its current 2020 lret

variable renewable energy technologies in the turkish electricity market quantile regression analysis of the merit order effect abstract the share of variable renewable energy sources in power supply has increased significantly in many countries however this increase has also created problems in electricity markets while the average day ahead market price has declined in several markets the merit order effect the remuneration mechanisms in some countries have to be revised due to the surge in financial costs yet further research is needed to understand the implications of the merit order effect for remuneration mechanisms thoroughly accordingly this study aims to contribute to the literature through employing a quantile regression model to analyze the merit order effect and discuss its implications for the remuneration mechanism in turkish electricity market model results show significant negative merit order effect for both wind and run of river hydro technologies however this effect varies with respect to demand price level and technology moreover the contribution of these technologies to the total welfare in the turkish electricity market does not favor fixed price payments in conclusion it is recommended that the remuneration mechanism is revised to include the temporal value of variable renewable energy sources and electricity market design should reflect the locational value of variable renewable energy sources in turkey

managing volumetric risk of long term power purchase agreements abstract a negative dependence between wind power production and electricity spot price exists this is an important fact to consider for risk management of long term power purchase agreements ppas in this study we investigate this dependence by constructing a joint model using constant as well as time varying copulas we propose to use score driven models as marginal model for the spot price of electricity as these are more robust to extreme events compared to arma garch models we apply the new model to pricing and risk management of ppas and benchmark it against the arma garch specification our comparison shows that the score driven model results in a statistically significant improvement of predicting the value at risk var which is of high importance for risk management of long term ppas further comparing constant and time varying copulas we find that all time varying copulas are significantly better than their constant counterparts at predicting the var hence time varying copulas should be used in risk management of ppas

the impact of renewable energies on eex day ahead electricity prices in this paper we analyze the impact of renewable energies wind and photovoltaic on the formation of day ahead electricity prices at eex we give an overview of the policy decisions concerning the promotion of renewable energy sources in germany and discuss their consequences on day ahead prices an analysis of electricity spot prices reveals that the introduction of renewable energies enhances extreme price changes in the frame of a dynamic fundamental model we show that there has been a continuous electricity price adaption process to market fundamentals furthermore the fundamental drivers of prices differ among hours with different load profiles our results imply that renewable energies decrease market spot prices and have implications on the traditional fuel mix for electricity production however the prices for the final consumers increased overall because they must pay in addition the feed in tariffs for the promotion of renewable energy

the impact of renewables on electricity prices in germany an update for the years 2014 2018 abstract increasing electricity prices for private consumers manifested the idea of price boosting renewable energy sources in germany s public opinion literature however widely concurs that wind and photovoltaics have a reducing effect on spot market electricity prices the underlying merit order effect led to historically low exchange prices in the past years to quantify this effect this study analyses historic demand and supply curves from the german day ahead market to reconstruct electricity prices without the feed in of wind and photovoltaics from 2014 to 2018 results show that renewable energy sources considerably reduced electricity prices by between 2 89 ct kwh in 2014 to 8 89 ct kwh in 2017 this allowed german end consumers to save a total of 40 billion from 2014 to 2018 additionally wind and pv contributed significantly to security of supply demand could not have been met by domestic conventional and nuclear generation capacities in up to 424 hours in 2018 the study highlights the necessity to further speed up the expansion of wind and photovoltaics

an ex post analysis of the effect of renewables and cogeneration on spanish electricity prices abstract growing concerns about climate change and energy dependence are driving specific policies to support renewable or more efficient energy sources such as cogeneration in many regions particularly in the production of electricity these policies have a non negligible cost and therefore a careful assessment of their impacts seems necessary in particular one of the most debated impacts is their effect on electricity prices for which there have been some ex ante studies but few ex post studies this article presents a full ex post empirical analysis by looking at use of technologies and hourly electricity prices for 2005 2009 in spain to study the effects that the introduction of renewable electricity and cogeneration has had on wholesale electricity prices it is particularly interesting to perform this study in spain where an active system of public support to renewables and cogeneration has led to a considerable expansion of these energy sources and electricity pricing is at the center of intense debate the paper reports that a marginal increase of 1 gwh of electricity production using renewables and cogeneration is associated with a reduction of almost 2 per mwh in electricity prices around 4 of the average price for the analyzed period

exogenous oil supply shocks how big are they and how much do they matter for the u s economy abstract the paper proposes a new measure of exogenous oil supply shocks the timing the magnitude and the sign of this measure may differ greatly from current state of the art estimates it is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions exogenous oil supply shocks cause a sharp drop of u s real gdp growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in cpi inflation after three quarters overall exogenous oil supply shocks made remarkably little difference for the evolution of the u s economy since the 1970s although they did matter for some historical episodes

the effect of wind and solar power forecasts on day ahead and intraday electricity prices in germany abstract this study analyzes the effects of wind and solar power generation forecasts on electricity prices converse to the existing empirical literature in this area we apply a panel data analysis to control for endogeneity due to unobserved heterogeneity we use a dataset with 24 daily observations of day ahead and intraday prices from 2010 to 2016 and we apply a fixed effects regression under consideration of robust driscoll kraay standard errors a noteworthy element of the regression model is the simulation based design of a variable indicating the power generation technology that is price determining at a certain point in time in this context we differentiate between the fuel types coal gas and others to model the nonlinear price behavior for a varying demand for 2016 we find price dampening effects of both wind and solar power of approximately 0 6 mwh per additional gwh of feed in along with the rapidly increasing shares of wind and solar power of the total power generation during the last years their price dampening effect has declined since 2013 due to a drop in fuel prices another finding is that a reduction in forecasting errors on the power generation from wind and solar and smoothing of the cyclical demand would lead to a decreased price volatility

does renewable energy generation decrease the volatility of electricity prices an analysis of denmark and germany although variable renewable energy vre technologies with zero marginal costs decrease electricity prices the literature is inconclusive about how the resulting shift in the supply curves impacts price volatility because the flexibility to respond to high peak and low off peak prices is crucial for demand response applications and may compensate for the losses of conventional generators caused by lower average prices there is a need to understand how the penetration of vre affects volatility in this paper we build distributed lag models with danish and german data to estimate the impact of vre generation on electricity price volatility we find that in denmark wind power decreases the daily volatility of prices by flattening the hourly price profile but in germany it increases the volatility because it has a stronger impact on off peak prices our analysis suggests that access to flexible generation capacity and wind power generation patterns contribute to these differing impacts meanwhile solar power decreases price volatility in germany by contrast the weekly volatility of prices increases in both areas due to the intermittency of vre thus policy measures for facilitating the integration of vre should be tailored to such region specific patterns

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

modeling the merit order curve of the european energy exchange power market in germany an updating study concerning the analysis and modeling of the european energy exchange power market in germany is urgently called for due to the dramatic transformations of the market in recent years based on careful data research this paper provides a consolidated and detailed view concerning the development of the market and its mechanisms this paper proposes a new analytical model of the merit order curve of the market the model is designed to capture the occurrences of negative prices it considers fuel prices and co2 prices and by taking into account the structural changes of the market such as the increasing energy in feed from renewable sources and the moratorium of nuclear power plants in germany the model is robust to these changes of market fundamentals the proposed merit order curve model constitutes a critical component in realistic fundamental models for the european energy exchange power market

demand pull instruments and the development of wind power in europe a counterfactual analysis renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions since most of these technologies did not yet reach grid parity public policies have been implemented in order to foster their deployment the approach that has been privileged in europe is the demand pull approach that aims at creating a demand for these new technologies and at stimulating their diffusion this paper examines the effect of demand pull policies on the diffusion of onshore wind power technology in six european countries denmark france germany italy portugal and spain in a first step a micro founded model of diffusion is calibrated in order to replicate the observed diffusion of wind power in these six countries in a second step a counterfactual analysis is conducted by investigating several scenarios by taking into account the complex self sustained dynamics of diffusion and the learning spillovers that operate in the wind power sector we can derive several insights about demand pull policies first the impact of a demand pull policy on the diffusion of wind power is determined by the stage at which it comes to support it the effect seems to be stronger at the beginning of the diffusion second international spillovers do operate in the wind power sector these international spillovers however are not strong enough to foster the diffusion of wind power in a country having no demand pull support we can derive from these two statements that a strategy consisting in not implementing any demand pull policy with the expectation that international spillovers will reduce the cost of wind power and foster the diffusion of the technology that then shall become competitive is not a good option for a country targeting a high share of wind power in its energy mix

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

estimating temperature effects on the italian electricity market abstract this paper provides empirical evidence of the effects that weather conditions exert on the electricity market offering a new contribution to the understanding of hourly regional price formation in the day ahead market in italy the empirical estimation uses a new data set of hourly data on both market variables and temperature variables there is a vast body of literature on the effect of temperature on final consumers and on wholesale electricity market equilibrium however the influence of temperature on the behavior of the wholesale electricity market has not been studied at the hourly level a new econometric estimation shows some evidence of different effects of temperature and provides a more accurate estimation of the hourly prices forecasting out of sample performance of the model is satisfactory the present results have welfare improving policy implications because appropriate policy strategies can help public decision makers promote regulation such as issuing public weather alert and designing contingent plans to face extreme weather conditions which improves production efficiency network management and consumer saving behavior taking specific weather conditions into account

evaluating the effect of technology transformation on the electricity utility industry abstract the technology shift from fossil fuelled systems to renewable energies has been promoted by governments with the purpose of decarbonising the power industry however rapid technology progress has prompted disruptive changes that transformed market structures incumbent electricity utilities particularly those based on fossil fuel plant are shifting from their stable and predictable situation to confront challenges from those that offer alternative energy services in this new environment the industry will benefit from mid to long term sector foresight the paper studies the potential impact of renewable energy sources res on electricity systems specifically on the generation and distribution businesses for this purpose a fairly detailed and integrated supply and demand based system dynamics model has been built to quantify the extent of their potential impact the model disaggregates the household sector which may generate a significant part of its electricity using rooftop solar energy this is illustrated by examining a utility engaged in the generation and distribution businesses in the colombian electricity market through simulation runs this paper concludes that subject to policy and all other things remaining equal solar rooftop generation is a major threat for utilities while the generation business is most affected in the short term the distribution business is the one most impacted in the long term and jointly they may induce the utility death spiral

on some economic principles of the energy transition abstract energy transitions are complex processes difficult to characterize using a small number of features we provide a simple framework for the energy transition pointing out that some scenarios have a higher probability the document is organized around four key propositions i the current energy transition is driven by policies rather than by technology improvements ii the energy transition disrupts liberalized electricity markets and undermines their economic foundation iii given the current technologies and technological perspectives the energy transition to renewable sources is going to be incomplete iv there is a change in consumer preferences for cleaner energy demanding new business models these propositions lead to the following consequences a the outcome in terms of electricity prices and energy production will depend on the policies applied as there are multiple possible policies and paths of energy transition b a complete transition based on renewable energy may be technically possible but difficult to manage in liberalized markets requiring a new design c there is a change in consumers preferences towards decarbonized energy creating new business opportunities and jeopardizing traditional business models it is difficult to make accurate predictions on the energy transition but we provide general guidelines for policymakers companies and investors

renewable energy regulation and structural breaks an empirical analysis of spanish electricity price volatility abstract international experience proves that electricity prices have undergone major changes in volatility since the entry of green technologies the intermittency of renewable sources is one of the reasons for these changes as it leads to higher volatility in periods of higher participation by renewables we argue that the development of the regulatory system promoting renewable electricity also plays a crucial role we raise a question that deserves attention could an incentive scheme induce higher share of renewables and lower volatility simultaneously in this paper we conduct an empirical analysis with spanish data we analyze possible ensuing structural changes in spanish electricity spot price volatility from january 2002 to december 2017 we identify two structural breaks linked to important measures related to renewable electricity i the abolishment of the feed in tariff scheme and ii the establishment of a more market oriented regulation based on investment and operating costs we conclude that stable regulatory policies reduce volatility even though the presence of renewable sources is greater furthermore market based policy measures achieve lower volatility encouraging good integration of intermittent renewable electricity

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

electricity costs in irrigated agriculture a case study for an irrigation scheme in spain abstract electricity prices have risen sharply in spain in recent years to the point where they are now among the highest in the eu the scant competition between power utilities changes in the law and the tariff deficit accumulated debt in favour mainly of the electricity firms have driven up the cost of electricity affecting numerous other industries such as irrigated agriculture a sector that has significantly increased its electricity consumption as a result of modernization processes over the past twenty five years we examine these issues through a case study of an irrigation scheme in spain that provides irrigation water and infrastructure to 58 farming communities in north eastern spain and is highly representative of the ebro valley based on the results of direct estimations and simulations of different tariffs we propose the lowering of capacity based tariffs to reduce sector problems and cut energy costs especially for farmers we also raise the possibility of increasing self consumption a complementary measure for many farmers and for medium size firms

dynamic analysis of the german day ahead electricity spot market abstract this paper analyzes the dynamic behavior of day ahead spot prices in the german electricity spot market due to positive structural shocks in wind and solar power it uses a dynamic structural vector autoregressive model to estimate the related structural impulse response functions the estimates suggest that wind power shocks have a more prolonged negative effect on spot prices than solar power shocks significant autocorrelations of wind power for larger lags indicate these results the total negative merit order effect of a solar power shock is larger when using a reasonable model specification one reason might be that solar power shocks coincide with demand peaks however results regarding the relation of the effects of wind and solar should be dealt with carefully because these results do not hold for all specifications past static estimates show differences in the total average negative merit order effects these estimates might be overstated if wind and solar power dynamics are transferred to the merit order effects

the merit order effect of wind and photovoltaic electricity generation in germany 2008 2016 estimation and distributional implications abstract generation from renewable energy sources in germany has experienced a considerable uptake in recent years mainly responsible for this development is the german renewable energy sources act erneuerbare energien gesetz eeg this paper considers redistributive implications of the eeg for different electricity consumers using time series regression analysis we show that electricity generation by wind and pv has reduced spot market prices considerably by 6 mwh in 2010 rising to 10 mwh in 2012 we use these results to build a near term forecasting tool for merit order effects projected to reach 14 16 mwh in 2016 on the other hand the costs of the eeg are passed forward to consumers in the form of a surcharge our findings highlight significant redistributive transfers under the current design of the eeg in particular some energy intensive industries are benefiting from lower wholesale electricity prices whilst being largely exempted from contributing to the costs of the scheme we also highlight implications of our results for other areas for reform of the eeg such as adequate remuneration mechanisms that ensure efficient operation and investment decisions are made under the scheme more generally these findings suggest that policy makers need to integrate distributional assessments into policy design and implementation