The merit order effect of wind and photovoltaic electricity generation in Germany 2008–2016: Estimation and distributional implications

By Johanna Cludius, H. Hermann, F. Matthes, Verena Graichen. 2014

391 citations recorded by the source corpus.

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.

Subfields: Electrical and Electronic Engineering

View Paper: https://www.semanticscholar.org/paper/5dfea74fb60e9fd32970aa300b70af1abd7df7aa

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In Electrical and Electronic Engineering

Citations in the corpus

Electricity price forecasting using sale and purchase curves: The X-Model (2015, background): “Especially the impact of wind and solar energy on electricity prices due to the merit-order eﬀect is well known (see e.g. Hirth (2013), Cludius et al. (2014) or Ketterer (2014)).”
Competition in Electricity Markets with Renewable Energy Sources (2017, background): “[2008], Nicolosi and Fursch [2009], Cludiusa et al. [2014]), GermanAustrian market (Wurzburg et al. [2013]), Danish market (Munksgaarda and Morthorstb [2008]), Irish market (O’Mahoney and Eleanor [2011]), and Australian market (McConnella et al. [2013])).”
Identifying barriers to large-scale integration of variable renewable electricity into the electricity market : A literature review of market design (2018, positive): “Empirical econometric analyses have indicated a correlation between the increased penetration of VRE and the decreased average spot price in many EU Member States, such as Austria [128], Germany [128,26], Italy [25] and Spain [108].”
Putting an energy system transformation into practice: The case of the German Energiewende (2016, background): “It decreased average German wholesale electricity prices by 6€/MWh in 2010, by 10€/MWh in 2012 and is estimated to increase to 14-16€/MWh in 2016 [56].”
Solar energy storage in German households: profitability, load changes and flexibility (2016, background): “Tveten et al. (2013) and Cludius et al. (2014) indicated a merit order effect with a decrease of electricity prices by PV (and wind) generation in Germany.”
Business models as drivers of the low carbon power system transition: a multi-level perspective (2016, background): “Yet, as of 57 2014 RWE electricity production in Germany is composed primarily by lignite (52%), followed by nuclear (21%), hard 58 coal (20%), gas (4”
Historical institutionalism and the politics of sustainable energy transitions: A research agenda (2017, background): “This arises from the ‘merit order effect’ whereby renewable generation displaces generation using fossil fuels (e.g. Cludius et al 2014).”
On the optimal reconstruction of partially observed functional data (2017, background): “Negative prices are an important marketfeature of the EPEX (see, for instance, Nicolosi, 2010; Fanone, Gamba and Prokopczuk, 2013; Cludius et al., 2014).”