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Intermittent versus dispatchable power sources: An integrated competitive assessment

Author

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  • Glenk, Gunther
  • Reichelstein, Stefan
Abstract
The cost and revenue earnings potential of alternative power generation sources has shifted considerably 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 over the years 2012-2019, primarily due to falling life-cycle costs of production. In California, these gains far outweigh an emerging 'cannibalization' trend that results from substantial additions of solar power having made energy less valuable in the middle of the day. We also find the competitiveness of natural gas power plants to have either improved or held steady. For this generation technology, declining capacity utilization rates have effectively been counterbalanced by a 'dispatchability price premium' that reflects the growing market share of intermittent renewables.

Suggested Citation

  • Glenk, Gunther & Reichelstein, Stefan, 2021. "Intermittent versus dispatchable power sources: An integrated competitive assessment," ZEW Discussion Papers 21-065, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:21065
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    References listed on IDEAS

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    Cited by:

    1. Gunther Glenk & Rebecca Meier & Stefan Reichelstein, 2021. "Cost Dynamics of Clean Energy Technologies," Schmalenbach Journal of Business Research, Springer, vol. 73(2), pages 179-206, June.

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    More about this item

    Keywords

    Renewable Energy; Intermittency; Dispatchable Power; Levelized Cost; Profit Margins;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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