Quantifying the short-term asymmetric effects of renewable energy on the electricity merit-order curve

Abstract

Amidst the growing significance of renewable energy, this paper examines the asymmetric effects of renewable energy on electricity prices and transmission flows in the Nordics using hourly electricity data. Employing a novel panel asymmetric fixed-effects method, we quantify the non-linear impact of renewable generation technologies on the electricity supply curve. Contrary to previous research, our analysis challenges the assumption of wind having symmetric effects in electricity markets. Specifically, we suggest that an increase in renewable energy cannot lead to price reductions of the same magnitude as the price increases caused by a decrease in wind. In addition, we investigate interconnections between regions and explore asymmetries in transmission flows due to wind generation. Our findings reveal the presence of asymmetric effects in the Nordic electricity market, highlighting their significance in achieving a secure electricity system. These results offer valuable insights for governments, policymakers, and market participants for optimizing the electricity generation mix, prioritizing flexible systems, and making informed investment decisions. © 2024 The Author(s)

Quantifying the short-term asymmetric effects of renewable energy on the electricity merit-order curve