The impact of renewable energy on electricity prices in the Netherlands

Abstract

<p>Electricity markets may become more sensitive to weather conditions because of a higher penetration of renewable energy sources and climatic changes. We investigate whether weather conditions had a growing influence on the average daily day-ahead price in the Dutch electricity market in the period 2006-2011, a period when renewable energy production increased. We account for weather conditions in both the Netherlands and Germany, as these two markets are closely connected. We find that the average wind speed in Germany negatively affects Dutch electricity prices. This effect is fairly constant despite the significant increase in German wind energy capacity. The impact of wind speed in the Netherlands on Dutch electricity prices slightly increased. We do not find a robust effect of the intensity of sunshine on electricity prices. The Dutch electricity price remains to a large extent related to the marginal costs of conventional gas-fired power plants. Although renewable energy sources have an increasing share in the generation portfolio, their impact on the electricity price in the Dutch electricity market is modest. (C) 2013 Elsevier Ltd. All rights reserved.</p>