The looming impact of higher shares of renewables on electricity market prices

In several European countries with Germany leading a remarkable increase in capacities and corresponding electricity generation from wind and photovoltaic power plants took place in recent years. The core objective of this paper is to investigate the possible effects of such a further uptake of renewables on the European electricity markets. The major effects of these developments on the electricity markets will be: (i) a much higher price volatility from hour-tohour and day-to-day; (ii) increasing relevance of intra-day markets; (iii) higher costs and prices for fossil capacities (due to higher shares of investment depreciation costs); (iv) increasing relevance of storages and “smart” grids, (vi) higher market shares for balancing markets; (vii) continuously increasing complexity of managing supply, storages and demand over time. JEL classification codes: Q42, Q48 Conference topic: Markets and drivers of Renewable Energy