Effects of self-generation in imperfectly competitive electricity markets: The case of Spain

David Ribó-Pérez, Adriaan Van Der Weijde, Carlos Álvarez Bel

Research output: Contribution to journalArticlepeer-review

Abstract

Domestic rooftop photovoltaic (PV) energy can reduce net electricity demand, and therefore reduce energy prices through a merit-order effect. This reduces profits of all incumbents in the electricity markets. In addition, in imperfectly competitive markets, PV self-generation reduces prices through a reduction in market power. The first effect may warrant additional policy interventions to maintain cost recovery, but the second is much more desirable, as it simultaneously helps increase sustainability and competition. However, unlike a simple reduction in market prices, the competition effect affects all incumbents differently. Since resistance from incumbents can be a significant barrier to energy policy change, it is important to understand the distribution of effects. This paper does so for the Spanish market. A Nash-Cournot model and a simplified representation of the Spanish electricity market is used to determine the merit-order and competition effects of an increase in solar self-generation. We conclude that both are important, and that their analysis is essential to inform the social debate around PV policy.
Original languageEnglish
Article number110920
JournalEnergy Policy
Volume133
Early online date7 Aug 2019
DOIs
Publication statusE-pub ahead of print - 7 Aug 2019

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