Abstract
The merit order effect (MOE), which renewable energy sources can decrease wholesale electricity prices, plays an important role in establishing low-carbon societies. After the liberalization of the electricity market, the trade volume of the Japan Electric Power Exchange (JEPX) day-ahead spot market drastically increased between 2016 and 2019; however, price spikes still occur often. Ordinary least squares and quantile regression analyses were applied in this study to investigate how wind and solar photovoltaics (PV) energy generation affect the JEPX day-ahead spot price by time, price range, and area, and we concluded that the MOE of wind increased between 2016 and 2019 while that of PV decreased during this time. In regard to the high price ranges, although wind generation is not significant in terms of reducing price spikes, PV had this effect in 2016 and 2017 but not during the other years covered. The study area was divided into four regions, and each area followed trends that were different from those of the national analysis. Overall, the key finding of our study is that wind power has more potential to reduce electricity prices than PV.
Highlights
Man-made greenhouse gases (GHGs) from burning fossil fuels are causing climate crisis worldwide
In terms of different price ranges, using quantile regression analysis, Hagfors et al (2016) found that the merit order effect (MOE) of PV is higher at higher price ranges in Germany, reducing the effect of extreme price spikes, while the MOE of wind is greater at lower price points
We choose three research objectives that have not been investigated in Japan far. (1): We investigate how the MOE has changed overtime, aiming to identify the changes that have occurred each year as the amount of electricity generated and the trade volume of the Japan Electric Power Exchange (JEPX) have changed. (2): We examine how the MOE varies across price ranges, analyzing whether variable renewable energy (VRE) penetration reduces price spikes. (3): We consider how the MOE differs across the four areas of Japan, identifying the differences between these areas (Japan is classified into four areas in this study based on price correlations listed on Appendix), as each area tends to have its own spot price and power supply composition (Figure 2)
Summary
Man-made greenhouse gases (GHGs) from burning fossil fuels are causing climate crisis worldwide. Csereklyei et al (2019) analyzed the MOE of wind and PV in Australia and found that with a 1 GW increase in 30-min dispatched capacity, wind has a wholesale price reduction effect of 11 AUD/kWh while solar has a wholesale price reduction effect of 14 AUD/kWh. According to Keeley et al (2021), electricity from wind and solar sources reduced the German/Austrian spot market price by 9.64 e/MWh on average between 2010 and 2017; these authors analyzed this phenomenon using generalized least squares regression and a machine learning approach. Maciejowska (2020) used quantile regression analysis to examine German electricity market prices and found that wind has a greater price-reducing impact on the lower tail of the price distribution while solar has a greater price-reducing impact on the higher tail of the price distribution As these studies show, the MOE was investigated in terms of its overall effect and at the area, year and price levels
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