Market value of wind and solar power
Wholesale power prices vary hour-by-hour (or minute-by-minute). Power plants that tend to produce in high-price hours have a higher average revenue per MWh – their market value is higher. This is specifically relevant for wind and solar power: their market value used to be high but drops with increasing market share – each MWh becomes less and less valuable. This is no coincidence: in windy and sunny hours the additional supply of power depresses the electricity price. Some call this a “self-cannibalization effect”.
Neon has published a series of studies on the market value of wind and solar power, inlcuding articles in Energy Economics and IET Renewable Power Generation. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and our power market model EMMA. In 2015 Neon conducted a study on behalf of the International Energy Agency that assessed a way to mitigate the value drop: a different design of wind turbines. The value drop of wind and solar power reflects increasing system costs.