Quantifying the "merit-order" effect in European electricity markets Rapid Response Energy Brief n° 3 INSIGHT_E
A report released by Insight_e, the European energy consortium specialised on energy policy research and analysis.
Lead author: Paul Deane (UCC). Authoring team: Sean Collins, Brian O'Gallachoir (UCC), Cherrelle Eid (Ifri), Rupert Hartel, Dogan Keles, Wolf Fichtner (KIT). Reviewer: Alberto Ceña (Kic)
The increase in renewable energy sources has contributed to containing and even lowering electricity wholesale prices in many markets (although not necessarily retail prices) by causin a shift in the merit order curve and substituting part of the generation of conventional thermal plants, which have higher marginal production costs. This merit order effect along with priority dispatch can affect revenues of conventional power plants, especially in Member States experiencing rapid deployment of variable renewables. In some Member States, this raises the question of how to ensure adequate investment signals on generation guaranteeing capacity and balancing power at the lowest possible cost.