Abstract
In order to analyse international effects of national energy policies, we investigate the spill-over effects of the German Energiewende on the Dutch power market, which is closely connected to the German market. We estimate the impact of the German supply of wind and solar electricity on the Dutch day-ahead price of electricity and the utilisation of the conventional power plants. We take cross-border capacity constraints into account and use hourly plant-level data over 2006–2014. We find that the price elasticity of German wind on Dutch day-ahead prices is −0.03. However, this effect vanishes when the cross-border capacity is fully utilised. We find a modest negative impact on the utilisation of the Dutch power plants. As such, we conclude that the German Energiewende has had modest spill-over effects to the Dutch market. The recent dramatic performance of the Dutch gas-fired plants can be attributed to the changes in the relative prices of coal versus natural gas. We conclude that national energy policies in one country do not necessarily strongly affect neighbouring markets in case of constrained cross-border capacities.
Highlights
Many countries are implementing policies to stimulate renewable energy
The electricity price appears to be negatively related to the intensity of competition as measured by the Residual Supply Index (RSI), but this impact decreases over time indicating that the market structure became less important for competition, which is in line with the findings of Mulder (2015)
As the utilisation of many conventional power plants in the Dutch market has strongly reduced in the recent past, we wonder to what extent the changes in the Dutch electricity market are related to the Energiewende in Germany
Summary
Many countries are implementing policies to stimulate renewable energy These policies are meant to reach national policy targets, they may have significant spill-overs regarding the power markets in neighbouring countries. A clear example of such a country is Germany, which is fundamentally transforming its domestic energy generation by replacing conventional power plants by renewable sources such as windmills and solar panels. This energy transition, which is called the Energiewende (energy turnaround), is a multi-decade effort to transform German society into a low-carbon renewables-based energy economy (Hitaj et al, 2014). Within less than a decade, its renewable energy capacity has almost tripled to 70 GW (see Figure 1)
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