Merit of Solar: The impact and future of solar photovoltaic generation in restructured electricity markets
Abstract:
Renewable energy capacity has rapidly expanded in recent years, as part of the global efforts to dramatically reduce carbon emissions and avoid catastrophic climate change. The addition of renewable energy capacity into restructured electricity market has been shown to markedly reduce wholesale spot prices around the world. This phenomenon, known as the “merit order effect”, has been argued to offset the cost of schemes supporting renewable energy by some, while others suggest it will necessarily increase prices in the long term, and is not welfare enhancing. These debates aside, the long-term implications of the merit order effect, for both renewable generators and liberalised electricity markets are not well understood. This research aims to investigate this issues in relation to distributed solar generation. Firstly, inversion modelling will be used to assess and characterise the contributions of rooftop solar generation to Australia’s electricity supply. Results from this analysis will then allow econometric techniques to be used to determine, estimates of the merit order effect, the impact on incumbent generator output and bidding behaviour and effect on emissions. Finally, this will allow potential short and long-term effects of renewable energy to be explore, using market modelling techniques.
Dr Dylan McConnell is an energy systems research fellow at the University of Melbourne Climate & Energy College and researcher at the multi-institutional Energy Transition Hub. He has extensive experience in analysing the electricity sector in Australia. Dylan’s work is focused on electricity infrastructure and governance, and the energy transition in liberalised electricity markets. He also specialises in operations research and the optimisation of electricity systems. His work is interdisciplinary and has been published in forums including the Journal of Energy Policy, the Journal of Applied Energy, the Electricity Journal, and the Journal of Environmental Sociology. His work can be found on The Conversation.
PhD Project: Merit of Solar - Impact and Future of Solar Photovoltaics in the Australian Market
Renewable energy capacity has rapidly expanded in recent years as part of global efforts to dramatically reduce carbon emissions and avoid catastrophic climate change. The addition of generation capacity been shown to markedly reduce wholesale spot prices in restructured electricity markets around the world. This phenomenon, known as the 'merit order effect', is demonstrably impacting electricity wholesale prices in Australia and abroad. On the one had, the effect has been argued to offset the cost of schemes supporting renewable energy. On the other hand, others suggest it is a wealth transfer and not welfare enhancing, leading to higher prices. Tthe long-term implications of the merit order effect, for both renewable generators and liberalised electricity markets, are poorly understood, while be critical to these debates, and renewable energy policy. This research aims to investigate this issues in relation to distributed solar generation. Firstly, inversion modelling will be used to assess and characterise the contributions of rooftop solar generation to Australia’s electricity supply. Results from this analysis will then allow econometric techniques to be used to determine, estimates of the merit order effect, the impact on incumbent generator output and bidding behaviour and effect on emissions. Finally, this will allow potential short and long-term effects of renewable energy to be explored, using market modelling techniques.
Supervisor: Prof. Mike Sandiford
Start Date: November 2013
Contact: dylan.mcconnell@climate-energy-college.org