Transcript The Impact of Renewable Energy on Electricity Prices in the

Influence of climate factors on
the electricity price
an econometric analysis on the Dutch
market over 2006-2011
Machiel Mulder and Bert Scholtens
Faculty of Economics and Business
University of Groningen
1
Outline
1.
Background
–
–
2.
more wind, solar cells, CHP plants
higher temperatures as a result of climate change (?)
Method
–
–
–
reduced-form equation of electricity price
economic factors: demand, fuel price, market power
climate factors: wind, day light, river temperature
3.
Data on the Dutch wholesale market
4.
Results and conclusions
2
Background: more wind and solar cells
Installed SOLAR capacity (GW)
0
0
5
10
10
GW
GW
15
20
20
30
25
Installed WIND capacity (GW)
2006
2007
2008
2009
2010
(first) jaar
Wind_Neth
Wind_Ger
2011
2006
2007
2008
2009
2010
2011
(first) jaar
Sun_Neth
Sun_Ger
Dutch market is closely linked to the German market (as part of the NWE market)
3
Explaining prices = controlling for demand
and supply factors
Price
*
*
*
*
*
*
*
*
*
*
*
*
*
- time patterns in demand
- economic factors affecting
demand
- market power
- fuel costs
- environmental restrictions
on generation
- wind
- day light
*
*
*
*
Quantity
4
Model
Log(APX) = β0
+ β1 log(Demand(-1))
+ β2 log(RSI)
+ β3 log(Gas price(-1))
+ β4 River Temperature
+ β5 log(Wind speed – Netherlands)
+ β6 log(Wind speed - Germany)
+ β7 log(Day light)
+ε
5
300
200
0
100
Index
400
500
Spot prices of electricity, gas and coal
2006
2007
2008
2009
2010
2011
2012
days per year
gas
electricity
coal
Volatility in day-ahead electricity price decreased strongly
6
Demand
Demand = production by centralised units + import – export
It is included as a lagged variable (- 1) to control for endogeneity
7
1.5
.5
1
index
2
2.5
Competition: measured by the RSI
2006
2007
2009
2008
2010
2011
hours
RSI (per firm) = (capacity of other firms + import capacity ) / demand
For each hour we include the RSI of the marginal firm
8
30
20
0
10
Euro/MWh
40
50
Gas price
2006
2007
2008
2009
2010
2011
hours
Gas price = TTF day-ahead price
It is included as a lagged variable (- 1) to control for endogeneity
9
Temperature of river water
15.0
10.0
0.0
5.0
degrees Celcius
20.0
25.0
River temperature
2006
2007
2008
2009
2010
2011
days
The threshold is 23 degrees: above this temperature plants have to shut down
This is included in the model as “number of degrees above 23”
10
Wind speed and day light
Day light
600
400
0
0
200
5
minutes
10
800
1000
15
Wind speed
2006
2006
2007
2008
2009
2010
2007
2008
2009
2010
2011
days
days
Wind speed is transformed in an indicator for the supply of wind energy on the
basis of technical characteristics of wind generators
Day light is expressed in number of minutes per day
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Data: correlation matrix
APX
Demand
(-1)
RSI
Gas
price(-1)
River
temp
Wind-NL
WindGER
APX
1.00
Demand
(-1)
.21
1.00
RSI
-.40
-.44
1.00
Gas price
(-1)
.69
-.05
.04
1.00
River temp
.10
-.04
.03
.03
1.00
Wind-NL
-.13
-.002
.06
-.004
-.10
1.00
Wind-GER
-.18
-.006
.07
-.03
-.10
.78
1.00
Day light
-.18
-.45
.27
-.14
.17
-.13
-.17
Note: all variables are measures in logs (except River temp)
Day light
1.00
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Results
Explanatory
variables
2006
2007
2008
2009
2010
2011
Log(demand(-1))
.54***
(.10)
.20*
(.11)
.16**
(.07)
.26***
(.06)
.26***
(.05)
.14***
(.03)
Log(RSI)
-.60***
(.09)
-.64***
(.11)
-.17***
(.06)
-.24***
(.04)
-.26***
(.03)
-.14***
(.02)
Log(gas price(-1))
.31***
(.07)
.33***
(.11)
.38***
(.12)
.36***
(.07)
.38***
(.09)
.60***
(.07)
River temperature
restriction
.04
(.04)
.
.05
(.19)
.05
(.05)
.03
(.04)
.
Log(Wind-NL)
.01
(.008)
-.003
(.006)
-.02***
(.008)
-.005
(.007)
-.008*
(.004)
-.006
(.004)
Log(Wind-GER)
-.05***
(.01)
-.05***
(.008)
-.03***
(.008)
-.04***
(.009)
-.02***
(.005)
-.03***
(.005)
Log(Day light)
-.61***
(.19)
-.13
(.21)
.17
(.15)
-.06
(.12)
-.06
(.09)
.06
(.07)
AR(1)
.40***
(.07)
.62***
(.06)
.58***
(.07)
.44***
(.07)
.50***
(.08)
.26***
(.07)
AR(2)
-.08
(.05)
-.21***
(.05)
-.06
(.05)
-.08
(.06)
.01
(.06)
.04
(.06)
Constant
.01***
(.002)
.01***
(.001)
.01***
(.001)
.01***
(.001)
.004***
(.0005)
.002***
(.0003)
Residual(-1)2
.96***
(.17)
.86***
(.16)
.60***
(.16)
.25***
(.10)
.40***
(.11)
.61***
(.14)
Adjusted R2
.75
.82
.76
.83
.83
.76
F stat. ARCH LM
.88
.14
.57
.96
.98
.73
Nobservations
356
357
366
364
365
365
Month dummies (1-11)
Day dummies (1-6)
Variance equation
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Conclusions
•
The electricity price has become more related to the price of gas
•
The merit order has become flatter as changes in demand have a
lower impact on the price
•
The electricity markets seems to have become more competitive as
the influence of pivotal players has reduced
•
In spite of the increase in wind and solar capacity, the climate factors
have less effect on the electricity price
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