The influence of renewables on the German day ahead electricity prices

Abstract

During the last 5 years European wholesale electricity markets have been confronted with a rapid increase in Renewable Energy Source (RES)-generation. RES-generation is characterized by (1) more decentralized production at typically dissimilar locations compared to traditional production and (2) more intermittent patterns of production depending on weather conditions. This chapter will focus on solar and wind energy, which have in common that they cannot be ordered to our disposal when we need them. However, the share of these renewables in the total energy supply in Germany has increased to such levels that the electricity prices on the day ahead spot market depend highly on the expected supply of solar and wind energy. In addition, regulations in favor of RES-generation in Germany have forced the Transmission System Operators (TSOs) to use all generated solar and wind energy. On windy and sunny days this has led to some exceptional cases of negative energy prices. This chapter identifies the influence of solar and wind energy supply on day ahead electricity prices.