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The impact of renewable energies on wholesale electricity prices

Author

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  • Javier Quintana

    (Banco de España)

Abstract

Rationale Renewable electricity generation capacity is rising significantly in Spain. Given the merit order pricing system used in the wholesale electricity market, this could have profound implications for electricity price dynamics. Takeaways •The share of wind and solar energy in total electricity generation increased from 26% in 2019 to over 40% in 2024 H1. In the first half of this year, wholesale electricity prices were more than 40% lower than they would have been had wind and solar generation remained at 2019 levels. •The model estimated in this article suggests that under the renewable generation deployment scenarios envisaged in the update of the National Energy and Climate Plan, wholesale electricity prices could drop by an additional 50% by 2030. •In any event, the future behaviour of these prices is subject to considerable uncertainty, influenced by various supply-side factors and how demand responds to the new levels of renewable generation.

Suggested Citation

  • Javier Quintana, 2024. "The impact of renewable energies on wholesale electricity prices," Economic Bulletin, Banco de España, issue 2024/Q3.
    • Handle: RePEc:bde:journl:y:2024:i:03:n:09
    DOI: https://doi.org/10.53479/37635
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    More about this item

    Keywords

    Electricity market; renewable energies; merit order pricing system;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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