The economic dynamics of competing power generation sources


Glenk, Gunther ; Reichelstein, Stefan


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DOI: https://doi.org/10.1016/j.rser.2022.112758
URL: https://www.sciencedirect.com/science/article/pii/...
Additional URL: https://www.researchgate.net/publication/362013908...
URN: urn:nbn:de:bsz:180-madoc-624494
Document Type: Article
Year of publication: 2022
The title of a journal, publication series: Renewable and Sustainable Energy Reviews
Volume: 168
Page range: 1-9
Place of publication: Oxford ; Amsterdam
Publishing house: Pergamon ; Elsevier Science
ISSN: 1364-0321 , 1879-0690
Publication language: English
Institution: Business School > Stiftungsprofessur für ABWL (Reichelstein 2018-)
Pre-existing license: Creative Commons Attribution 4.0 International (CC BY 4.0)
Subject: 330 Economics
Abstract: Competing power generation sources have experienced considerable shifts in both their revenue potential and their costs in recent years. Here we introduce the concept of Levelized Profit Margins (LPM) to capture the changing unit economics of both intermittent and dispatchable generation technologies. We apply this framework in the context of the California and Texas wholesale power markets. Our LPM estimates indicate that solar photovoltaic and wind power have both substantially improved their competitive position during the years 2012–2019, primarily due to falling life-cycle costs of production. In California, these gains far outweigh an emerging “cannibalization” effect that results from substantial additions of solar power having made energy less valuable in the middle of the day. As such, intermittent renewables in both states have been approaching or exceeding the break-even value of zero for the estimated LPMs. We also find the competitiveness of natural gas power plants to have either improved in Texas or held steady at negative LPMs in California. For these plants, declining capacity utilization rates have effectively been counterbalanced by a “dispatchability price premium” that reflects the growing market share of intermittent renewables.
Additional information: Online-Ressource

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BASE: Glenk, Gunther ; Reichelstein, Stefan

Google Scholar: Glenk, Gunther ; Reichelstein, Stefan

ORCID: Glenk, Gunther ORCID: 0000-0003-2540-838X ; Reichelstein, Stefan

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