High electricity price despite expansion in renewables: How market trends shape Germany's power market in the coming years

Liebensteiner M, Abuzayed AIS, Ocker F (2024)

Publication Language: English

Publication Type: Journal article, Original article

Publication year: 2024

Journal

Energy Policy Elsevier

URI: https://www.energymarkets.wiso.rw.fau.de/files/2024/10/Manuscript_Price_withAuthorDetails.pdf

Abstract

Expectations about future energy prices are crucial for investment decisions, market reform debates, and public policy. Yet, the recent energy crisis caused dramatic market uncertainty. This study investigates Germany's near-future wholesale electricity price in the context of evolving market trends. A flexible econometric model is applied to high-frequency, near-time data, spanning January 2015 through May 2023. A potential endogeneity bias of trade is circumvented by an instrumental-variables approach. Results indicate that expanding renewable energy exerts downward pressure on price, countering trends like the nuclear phaseout, a rising carbon price, increased electrification, and a high gas price. The collective impact suggests a considerably higher electricity price in the coming years compared to pre-crisis levels. This finding is corroborated by a fundamental energy system model. The potential rise in renewables' production volatility may amplify electricity price volatility. A high and volatile near-future electricity price could spur investments in renewables and flexibility technologies but pose challenges for consumers. Our analysis aids evidence-based decision-making amid the post-crisis landscape.

Authors with CRIS profile

Mario Liebensteiner Juniorprofessur für Wirtschaftswissenschaften (Energiemärkte und Energiesystemanalyse) Anas Ishtaiwi Salman Abuzayed Juniorprofessur für Wirtschaftswissenschaften (Energiemärkte und Energiesystemanalyse)

Involved external institutions

TenneT TSO GmbH DE Germany (DE)

How to cite

APA:

Liebensteiner, M., Abuzayed, A.I.S., & Ocker, F. (2024). High electricity price despite expansion in renewables: How market trends shape Germany's power market in the coming years. Energy Policy.

MLA:

Liebensteiner, Mario, Anas Ishtaiwi Salman Abuzayed, and Fabian Ocker. "High electricity price despite expansion in renewables: How market trends shape Germany's power market in the coming years." Energy Policy (2024).

BibTeX: Download