IEEE Power & Energy Magazine - July/August 2015 - 32

To achievpport schemes
for RESs for electricity have been implemented
at the national level.

electricity prices for the EU-28.
Figure 3 also shows the evolution of prices for German import
0.25
gas and north-west import coal
contracts, which are proxies for
the fuel prices for thermal units.
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The right-hand scale in the figure shows the share of RES-E
0.15
generation as a percentage of
the generation mix in the EU-28.
The relative decrease of elec0.10
tricity prices can be explained
by a mix of factors, such as
0.05
the decrease of coal prices,
EU-28 Residential
DE Residential
ES Industrial
later decrease of gas prices at
ES Residential
DE Industrial
EU-28 Industrial
the beginning of 2014, and the
0.00
increase of RES-E (mainly wind
and solar). Additionally, hydro
units substantially contributed
figure 4. The average retail electricity prices for residential and industrial consumers
to lowering electricity prices,
in the EU-28, Germany, and Spain (€/kWh). (Source: Eurostat.)
mainly in rainy periods.
In addition to the meritorder effect, there are other regulations that contribute to
Impact of RES-E on EU Market Prices
In addition to direct subsidies, RES-E have impacted the reduce electricity prices due to RES-E generation. The sowholesale market prices as these units modify the dispatch called "priority of dispatch" rule included in the EU legorder of existing generation units. In addition, the management islation (under Directive 2009/28/EC) implies that RES-E
of energy imbalances from intermittent RES-E is another im-- can only be limited because of security reasons even if a
unit commitment algorithm indicates that it is cheaper to
portant challenge for the market integration.
curtail RES-E. The rationale followed by this rule is to
meet the renewable targets and to incentivize flexibility in
Wholesale Market
As RES-E units have low marginal costs (due to free fuel the electricity system.
costs, such as wind, solar, or hydro), they may replace part
of thermal units shifting the supply curve to the right. As Network Costs
a consequence, short-term market prices tend to decrease; RES-E may require the expansion or reinforcement of existthis is known as the merit-order effect. However, with the ing networks. Frías et al. quantified the network costs for
increase of RES-E generation, there is a need for backup 2030 RES-E scenarios in the southwestern Europe region
units to handle the intermittency of RES-E. In addition, and concluded that network costs strongly depend on whether
lower prices decrease incentives to invest. These last two the promotion of RES-E considers only the abundance of
effects are long or medium term, and they eventually would natural resources or also the associated network costs.
increase electricity prices. Würzburg et al. found that, among
different studies, the merit-order effect prevails, and, as a System Services
consequence, electricity prices generally decrease due to an RES-E not only have an impact on wholesale markets but also
increase in renewable generation. The final effect depends, on other parallel markets used to solve congestions and balamong other aspects, on the market size.
ance the system. While wholesale prices can decrease because
Figure 3 shows the evolution of the Platts European Power of the merit-order effect and the priority dispatch rule, the need
Index as a reference for the monthly average wholesale of ancillary services and associated costs can increase.
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