SEMINAR: The Market Value of Wind and Solar Energy: Strategies at Archive Cost-Competitiveness of Renewable Energy
With record-breaking tender results dominating the renewable energy news, cost competitiveness seems to be a no-brainer. However, the economics of wind and solar energy has two sides: cost and value. We study the marginal economic value or “market value” (USD/MWh) of renewable energy, finding a drop in value of concerning size as these technologies penetrate the market. I will present model-based results for Europe, a quantitative meta-analysis of published studies, and econometric evidence. Different measures can help mitigate the value drop, including electricity storage, flexible conventional plants, expansion of transmission, and demand response. In a recent study, we have assessed another option: a change in the design of wind power plants. “Advanced” wind turbines that are higher and have a larger rotor compared to rated capacity (lower specific rating) generate electricity more constantly than “classical” turbines. Recent years have witnessed a significant shift towards such advanced technology. Our model-based analysis for Northwestern Europe shows that such design can substantially increase the spot market value of generated electricity. At a 30% penetration rate, the value of one MWh of electricity generated from a fleet of advanced turbines is estimated to be 15% higher than the value of one MWh from classical turbines. The additional value is large, whether compared to wind generation costs, to the value drop, or to the effect of alternative measures such as electricity storage. Extensive sensitivity tests indicate that this finding is remarkably robust. Link to papers
Dr. Lion Hirth
Professor, Hertie School of Governance
Dr. Lion Hirth is an assistant professor at Hertie School of Governance, a Berlin-based public policy school; founder and director of Neon, a consulting firm; and research fellow at MCC, a think tank. He is an energy economist and expert in wind and solar power, power market modeling, and electricity market design. Previously, Lion spent five years with the Swedish utility Vattenfall, where he was concerned with long-term price projections. His most recent projects were a model-based assessment of system-friendly wind power for the International Energy Agency, the construction of an open data platform for the German government, and wholesale power price modeling for the Swedish electricity trade association. He also consults the German government on wholesale and balancing market design. He has developed and maintains the open-source power market model EMMA. Lion holds a Ph.D. in energy economics, a Diploma in economics, and a Magister in political science.