Abstract
In this paper, we study the relationship between the merit order effect and the ownership structure of renewable resources in electricity markets. We use daily frequency data from the Colombian electricity market in 2012-2019 and designed a strategy to estimate the spot price's dependence on renewable energy. We study how the participation of multi-technology firms in renewable energy alters the spot price. Our main results show a merit order effect for the Colombian electricity market, but this weakens in the presence of greater participation of multi-technology firms in the total availability of renewable energy for the day.
Highlights
Global trends in the inclusion of renewable energy in electricity markets show notable growth in generation with these technologies (IRENA, 2019)
This growth responds to the notable cheapening of these technologies and countries’ political support for the world’s energy transition (Fu et al, 2017). These trends mean that markets, whether dominated by conventional technologies such as thermal generation, must prepare for a growing penetration of renewable energy. This penetration affects the formation of electricity prices and carbon emissions in the countries, regardless of how green their energy matrices are the inclusion of renewable energy in spot electricity markets and its effect on relevant variables such as prices and greenhouse gas (GHG) emissions has motivated a variety of studies in recent years
We propose an empirical strategy to study the relationship between the concentration in ownership of renewable energy sources and the merit order effect on spot prices, considering that price formation depends on the fundamentals associated with the marginal costs of generating plants
Summary
Global trends in the inclusion of renewable energy in electricity markets show notable growth in generation with these technologies (IRENA, 2019). The addition of renewable energy in spot electricity markets and its effect on relevant variables such as prices and greenhouse gas (GHG) emissions has motivated various studies in recent years. In extreme cases where multi-technology firms own all the renewable energy supply, and the cost function is linear, the MoE disappears This last result implies that higher energy supplies with renewable sources have no impact on electricity’s equilibrium prices. The authors investigate the implications of the ownership of a new technology of low production costs in the market Their theoretical framework measures the impact of renewable energy introduction in the Ontario electricity market and examines how renewable capacity ownership changes the market’s outputs (prices, production, emissions). The fourth section presents the results, and the fifth section, some policy implications
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