The merit order effect of renewable electricity generation in Australia
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ACDE Seminar
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Electricity generation from renewable energy sources in Australia has expanded rapidly. The share of electricity generated by renewables rose from 8 per cent in 2000 to 17 per cent in 2017. Despite this development, there are significant misconceptions about the effect of renewable electricity generation on wholesale prices within the heated public debate that is currently ongoing in Australia. Our econometric analysis, using high frequency (30 minute) generation and price data from 2010-2018 shows that increased penetration of wind and solar generation has resulted in the decrease of average wholesale electricity prices. Had there been lower penetration of renewable generation sources, wholesale electricity prices in Australia would have been higher than they actually were. These findings further strengthen the evidence of a merit order effect of renewable energy sources, with important implications for the current energy policy debate.
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