Market viability of photovoltaic plants: merit order effect approach

Janda, Karel and Tuma, Ladislav (2016): Market viability of photovoltaic plants: merit order effect approach.

Abstract

We consider future prospects of solar energy in Central Europe. We first provide the description of the Czech energy situation with emphasize on photovoltaic energy. After that we estimate the merit-order effect. In last five years the Czech wholesale price of electricity decreased on average by 0.009 EUR/MWh. The total average merit-order effect over five-year period was 4.544 EUR/MWh. The effects were more pronounced in later years. New Czech solar projects are not viable without subsidies and new projects would not be able to profitable without public support. Thus solar power plants do not appear to be a reasonable choice in the Czech Republic. Nevertheless, low Czech wholesale electricity prices make all electricity sources not competitive.

• Item Type: MPRA Paper
• Language: English
• Keywords: solar; photovoltaics; electricity; merit order effect
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting

References

Barnham, K., Knorr, K., & Mazzer, M. (2013). Benefits of photovoltaic power in supplying national electricity demand. Energy Policy , 385-390.

Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics , 307-327.

Borenstein, S. (2012). The private and public economies of renewable electrcity generation.

Borenstein, S. (2008). The Market Value and Cost of The Market Value and Cost of . Center for the Study of Energy Markets (CSEM) Working Paper Series (176).

Cludius, J., Hermann, H., Matthes, F., & Graichen, V. (2014). The merit order effect of wind and photovoltaic electricity generation in Germany 2008–2016: Estimation and distributional implications. Energy Economics , 302-313.

Energy Regulatory Office. (2013). Price decision 4/2013.

Engle, R. (1982). Autoregressive Conditional Heteroscedasticity with Estiamtes of the Variance of United Kinfdom Inflation. Econometrica , 987-1007.

Felcman, T. (2014). Economic model of Photovoltaic power p. CTU FEE Bachelor's thesis .

Fraunhofer Insitute. (2014). Photovoltaics Report.

Fraunhofer instittut. (2013). Fraunhofer institut for solar energy systems ISE. Retrieved June 2, 2015, from Fraunhofer institut for solar energy systems ISE: http://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studien-und-konzeptpapiere/study-levelized-cost-of-electricity-renewable-energies.pdf

Green, R., & Vasilakos, N. (2011). The Long-term Impact of Wind Power on Electricity Prices and Generating. Departemnt of Economics Discussion Paper .

Hiroux, C., & Saguan, M. (2010). Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs? Energy Policy , 38, 3135-3145.

Horváth, R. (2015). Institute of Economic Studies. Retrieved June 25, 2015, from Applied Econometrics: http://ies.fsv.cuni.cz/default/file/download/id/27970

Janda, K., Krška, Š., & Průša, J. (2014). The Estiamtion of the Cost of Promotion of the Czech Photovoltaic Energy. MPRA Paper (54108).

Janda, K., Krška, Š., & Průša, J. (2014). The Estimation of the Cost of Promotion. MPRA Paper (54108).

Jenner, S. (2012). Did Feed-in Tariffs work? An Econometric Assessment.

Kalkuhl, M., Lessmann, K., & Edenhofer, O. (2013). Renewable energy subsidies: second-best policy or fatal aberration for mitigation? Energy Economics , 35, 217-234.

Ketterer, J. (2012). The Impact of Wind Power Generation on the Electricity Price in Germany. Ifo Working Paper (143).

Lund, P. (2011). Boosting new renewable technologies towards grid parity – Economic and policy aspects. Renewable Energy , 2776-2784.

Milstein, I., & Tishler, A. (2011). Intermittently renewable energy, optimal capacity mix and prices. Energy Policy , 39, 3922–3927.

Milstein, I., & Tishler, A. (2012). The inevitability of capacity underinvestment in competitive electricity markets. Energy Economics , 62-77.

Ministry of Industry and Trade of the Czech Republic. (2014). National energy concept.

Musgens, F., Ockenfels, A., & Peek, M. (2014). Economics and design of balancing power markets in Germany. Electrical Power and Energy Systems , 392-401.

Olson, A., & Jones, R. (2012). Chasing Grid Parity: Understanding the Dynamic Value of Renewable Energy. The Electrcity Journal , 17-27.

Průša, J., Klimešová, A., & Janda, K. (2013). Consumer Loss in Czech Photovoltaic Power Plants. CAMA Working Papers , 50.

US Energy Information Administration. (2015, April 14). Annual Energy Outlook 2015. Retrieved June 2, 2015, from Annual Energy Outlook 2015: http://www.eia.gov/forecasts/aeo/electricity_generation.cfm#1

Vandezande, L., Meeus, L., Belmans, R., Saguan, M., & Glachant, J.-M. (2010). Well-functioning balancing markets: A preregquiste for wind power integration. Energy Policy , 3146-3154.

Wurzburg, K., Labandiera, X., & Linares, P. (2013). Renewable generation and electrcity prices: Taking stock and new evidencefor Germany and Austria. Energy Economics (40), 159-171.

Yang, C.-J. (2010). Reconsidering solar grid parity. Energy Policy , 3270-3273.