KAPSARC – The Impact of Variable Renewables on Price Dynamics Within Wholesale Electricity Markets

The study examines the impact of variable renewable energy (VRE) on price dynamics within wholesale electricity markets.

The research highlights that the integration of VRE complicates the functioning of electricity markets. It uses data on unplanned outages of wind power plants as exogenous shocks to analyze their effect on price dynamics. In the short term, unplanned outages significantly impact price dynamics, while in the long term, their influence is limited. The study emphasizes the need for increased grid flexibility, demand response strategies, and energy storage solutions to accommodate the growing share of VRE.