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Handbook of Risk Management in Energy Production and Trading pp 283–311Cite as

Renewable Energy and Its Impact on Power Markets

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Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 199))

Abstract

The widespread introduction of renewable energy production is transforming electricity markets all around the globe. The changes are often hard to anticipate for market participants and the resulting uncertainty about future market conditions, policy regimes, technologies, and prices makes participation in these markets risky. In this article, we focus on changes induced by the growing capacities of wind power and photovoltaic electricity production. We highlight some aspects of power markets that are currently changing fundamentally due to increased capacities in these technologies. In particular, we discuss technological development, predictability and stochastic modeling of wind and solar output, policy issues pertaining to subsidies for renewable energies, and effects on the electricity prices on spot markets. We illustrate our findings using data from Germany and the Californian electricity market.

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Notes

  1. 1.

    See http://www.nrel.gov/analysis/tech_lcoe.html.

  2. 2.

    The Coase theorem provides bargaining as a solution to cope with externalities in a market. However, property has to be defined in order to trade the externality. Furthermore, for the theorem to be applicable, the absence of transaction costs is necessary. In the case of a public good like environmental protection, property rights are poorly defined and also transaction costs would be severe.

  3. 3.

    Data on California’s hydro generation contains also production from pumped hydro storages, which are normally not counted as renewable.

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Authors and Affiliations

  1. Institute for Finance, Banking and Insurance, Vienna University of Economics and Business, Welthandelsplatz 1, 1020, Vienna, Austria

    David Wozabal

  2. Institute of Business Administration, University of Vienna, Oskar-Morgenstern-Platz 1, 1090, Vienna, Austria

    Christoph Graf & David Hirschmann

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  1. David Wozabal
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  2. Christoph Graf
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Correspondence to David Wozabal .

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Editors and Affiliations

  1. Department of Statistics & OR, University of Vienna, Wien, Austria

    Raimund M. Kovacevic

  2. Department of Statistics & OR, University of Vienna, Wien, Austria

    Georg Ch. Pflug

  3. Department of IT & Mathematical Methods, University of Bergamo, Dalmine, Bergamo, Italy

    Maria Teresa Vespucci

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Wozabal, D., Graf, C., Hirschmann, D. (2013). Renewable Energy and Its Impact on Power Markets. In: Kovacevic, R., Pflug, G., Vespucci, M. (eds) Handbook of Risk Management in Energy Production and Trading. International Series in Operations Research & Management Science, vol 199. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-9035-7_12

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