Renewable energies and electricity prices in Spain Liliana Gelabert*, Xavier Labandeira** and Pedro Linares*** Instituto de Empresa*, Universidade de Vigo**, Universidad Pontificia Comillas*** and Fundación de Estudios de Economía Aplicada (FEDEA) IAEE 2009 European Conference Vienna
Overview I. Motivation II. Related literature III. Econometric analysis IV. Results V. Conclusions
I. Motivation Advantages of renewable energies Climate Action Program Promotion policies Debate on final cost for small consumers, large consumers, competitiveness, etc.
II. Related literature Theoretical literature Amundsen and Mortensen (2001) Jensen and Skytte (2002) Fisher (2006) Empirical literature a) Simulations Sensfuss et al (2008) Linares et al (2008) b) Expost analysis Sanez de Miera et al (2008) Rathmann (2007)
III. Econometric analysis Daily electricity prices and use of technologies in Spain for 2005-2007 (Source: REE and OMEL)
III. Econometric analysis Descriptive Statistics 2005 2006 2007 All the sample (N=1095) Mean St.Dev. Mean St.Dev. Mean St.Dev. Mean St.Dev. Min. Max. ELECPRICE 60.232 12.485 61.177 13.557 43.913 8.232 55.108 14.086 28.094 98.983 TOTDEM 28.245 3.454 28.426 3.416 29.592 3.298 28.754 3.439 19.584 37.407 SPREGIME 5.678 1.253 5.225 1.424 6.222 1.505 5.708 (19.56%) (17.94%) (20.29%) (19.27%) 1.455 2.632 10.121 HIDRO 2.036 0.687 2.845 1.506 2.970 1.162 2.618 (6.97%) (9.69%) (9.70%) (8.79%) 1.238 0.604 7.625 NUCLEAR 6.287 1.011 6.570 0.833 6.018 1.011 6.292 (21.68%) (22.56%) (19.73%) (21.32%) 0.981 3.316 7.542 COAL 8.380 4.811 7.085 1.621 7.741 1.035 7.735 (28.80%) (23.95%) (25.29%) (26.01%) 1.343 2.571 10.227 COMBCYCLE 5.498 1.479 7.122 2.001 7.599 2.688 6.740 (18.71%) (23.94%) (24.21%) (22.29%) 2.297 1.346 14.536 FUELGAS 1.298 0.848 0.593 0.565 0.241 0.184 0.711 (4.28%) (1.91%) (0.76%) (2.32%) 0.742 0* 3.826 All figures correspond to daily averages. Electricity prices are in Euros per MWh. Total demand and total generation by energy source are in GWh. Proportion of total generation corresponding to each energy source in parentheses. Total daily observations: 1095. (*)FUELGAS is zero for 61 daily observations.
III. Econometric analysis Descriptive Statistics 2005 2006 2007 All the sample (N=1095) Mean St.Dev. Mean St.Dev. Mean St.Dev. Mean St.Dev. Min. Max. ELECPRICE 60.232 12.485 61.177 13.557 43.913 8.232 55.108 14.086 28.094 98.983 TOTDEM 28.245 3.454 28.426 3.416 29.592 3.298 28.754 3.439 19.584 37.407 SPREGIME 5.678 1.253 5.225 1.424 6.222 1.505 5.708 (19.56%) (17.94%) (20.29%) (19.27%) 1.455 2.632 10.121 HIDRO 2.036 0.687 2.845 1.506 2.970 1.162 2.618 (6.97%) (9.69%) (9.70%) (8.79%) 1.238 0.604 7.625 NUCLEAR 6.287 1.011 6.570 0.833 6.018 1.011 6.292 (21.68%) (22.56%) (19.73%) (21.32%) 0.981 3.316 7.542 COAL 8.380 4.811 7.085 1.621 7.741 1.035 7.735 (28.80%) (23.95%) (25.29%) (26.01%) 1.343 2.571 10.227 COMBCYCLE 5.498 1.479 7.122 2.001 7.599 2.688 6.740 (18.71%) (23.94%) (24.21%) (22.29%) 2.297 1.346 14.536 FUELGAS 1.298 0.848 0.593 0.565 0.241 0.184 0.711 (4.28%) (1.91%) (0.76%) (2.32%) 0.742 0* 3.826 All figures correspond to daily averages. Electricity prices are in Euros per MWh. Total demand and total generation by energy source are in GWh. Proportion of total generation corresponding to each energy source in parentheses. Total daily observations: 1095. (*)FUELGAS is zero for 61 daily observations.
III. Econometric analysis Descriptive Statistics 2005 2006 2007 All the sample (N=1095) Mean St.Dev. Mean St.Dev. Mean St.Dev. Mean St.Dev. Min. Max. ELECPRICE 60.232 12.485 61.177 13.557 43.913 8.232 55.108 14.086 28.094 98.983 TOTDEM 28.245 3.454 28.426 3.416 29.592 3.298 28.754 3.439 19.584 37.407 SPREGIME 5.678 1.253 5.225 1.424 6.222 1.505 5.708 (19.56%) (17.94%) (20.29%) (19.27%) 1.455 2.632 10.121 HIDRO 2.036 0.687 2.845 1.506 2.970 1.162 2.618 (6.97%) (9.69%) (9.70%) (8.79%) 1.238 0.604 7.625 NUCLEAR 6.287 1.011 6.570 0.833 6.018 1.011 6.292 (21.68%) (22.56%) (19.73%) (21.32%) 0.981 3.316 7.542 COAL 8.380 4.811 7.085 1.621 7.741 1.035 7.735 (28.80%) (23.95%) (25.29%) (26.01%) 1.343 2.571 10.227 COMBCYCLE 5.498 1.479 7.122 2.001 7.599 2.688 6.740 (18.71%) (23.94%) (24.21%) (22.29%) 2.297 1.346 14.536 FUELGAS 1.298 0.848 0.593 0.565 0.241 0.184 0.711 (4.28%) (1.91%) (0.76%) (2.32%) 0.742 0* 3.826 All figures correspond to daily averages. Electricity prices are in Euros per MWh. Total demand and total generation by energy source are in GWh. Proportion of total generation corresponding to each energy source in parentheses. Total daily observations: 1095. (*)FUELGAS is zero for 61 daily observations.
III. Econometric analysis Descriptive Statistics 2005 2006 2007 All the sample (N=1095) Mean St.Dev. Mean St.Dev. Mean St.Dev. Mean St.Dev. Min. Max. ELECPRICE 60.232 12.485 61.177 13.557 43.913 8.232 55.108 14.086 28.094 98.983 TOTDEM 28.245 3.454 28.426 3.416 29.592 3.298 28.754 3.439 19.584 37.407 SPREGIME 5.678 1.253 5.225 1.424 6.222 1.505 5.708 (19.56%) (17.94%) (20.29%) (19.27%) 1.455 2.632 10.121 HIDRO 2.036 0.687 2.845 1.506 2.970 1.162 2.618 (6.97%) (9.69%) (9.70%) (8.79%) 1.238 0.604 7.625 NUCLEAR 6.287 1.011 6.570 0.833 6.018 1.011 6.292 (21.68%) (22.56%) (19.73%) (21.32%) 0.981 3.316 7.542 COAL 8.380 4.811 7.085 1.621 7.741 1.035 7.735 (28.80%) (23.95%) (25.29%) (26.01%) 1.343 2.571 10.227 COMBCYCLE 5.498 1.479 7.122 2.001 7.599 2.688 6.740 (18.71%) (23.94%) (24.21%) (22.29%) 2.297 1.346 14.536 FUELGAS 1.298 0.848 0.593 0.565 0.241 0.184 0.711 (4.28%) (1.91%) (0.76%) (2.32%) 0.742 0* 3.826 All figures correspond to daily averages. Electricity prices are in Euros per MWh. Total demand and total generation by energy source are in GWh. Proportion of total generation corresponding to each energy source in parentheses. Total daily observations: 1095. (*)FUELGAS is zero for 61 daily observations.
III. Econometric analysis Descriptive Statistics 2005 2006 2007 All the sample (N=1095) Mean St.Dev. Mean St.Dev. Mean St.Dev. Mean St.Dev. Min. Max. ELECPRICE 60.232 12.485 61.177 13.557 43.913 8.232 55.108 14.086 28.094 98.983 TOTDEM 28.245 3.454 28.426 3.416 29.592 3.298 28.754 3.439 19.584 37.407 SPREGIME 5.678 1.253 5.225 1.424 6.222 1.505 5.708 (19.56%) (17.94%) (20.29%) (19.27%) 1.455 2.632 10.121 HIDRO 2.036 0.687 2.845 1.506 2.970 1.162 2.618 (6.97%) (9.69%) (9.70%) (8.79%) 1.238 0.604 7.625 NUCLEAR 6.287 1.011 6.570 0.833 6.018 1.011 6.292 (21.68%) (22.56%) (19.73%) (21.32%) 0.981 3.316 7.542 COAL 8.380 4.811 7.085 1.621 7.741 1.035 7.735 (28.80%) (23.95%) (25.29%) (26.01%) 1.343 2.571 10.227 COMBCYCLE 5.498 1.479 7.122 2.001 7.599 2.688 6.740 (18.71%) (23.94%) (24.21%) (22.29%) 2.297 1.346 14.536 FUELGAS 1.298 0.848 0.593 0.565 0.241 0.184 0.711 (4.28%) (1.91%) (0.76%) (2.32%) 0.742 0* 3.826 All figures correspond to daily averages. Electricity prices are in Euros per MWh. Total demand and total generation by energy source are in GWh. Proportion of total generation corresponding to each energy source in parentheses. Total daily observations: 1095. (*)FUELGAS is zero for 61 daily observations.
III. Econometric analysis Average generation levels by technology in each 25% demand percentile 1 st 2 nd 3 rd 1 st -3 rd Domestic Demand 25.09 28.96 33.01 7.92 Special Regime 5.19 5.80 6.03 0.84 Hydroelectric 2.15 2.67 2.98 0.83 Nuclear 6.13 6.17 6.69 0.56 Coal 6.68 7.81 8.63 1.95 Combined Cycle 4.63 6.90 8.53 3.90 Fuel/Gas 0.35 0.67 1.15 0.8 All figures are expressed in GWh.
III. Econometric analysis Use of technologies and hourly electricity prices in Spain for 2005-2007 (Source: REE and OMEL) Unit roots (Dickey and Fuller, 1979)
III. Econometric analysis Augmented Dickey Fuller test statistics (variables in levels) ELECPRICE -2.409 TOTDEM -4.044 SPREGIME -3.412 HIDRO -3.475 NUCLEAR -3.232 COAL -3.539 COMBCYCLE -3.429 FUELGAS -3.055 MacKinnon (1991) critical values for rejection of hypothesis of a unit root are -2.570 (for 10% confidence level), -2.860 (for 5% confidence level), and -3.430 (for 1% confidence level).
III. Econometric analysis Use of technologies and hourly electricity prices in Spain for 2005-2007 (Source: REE and OMEL) Test for unit roots (Augmented Dickey Fuller) Seasonality
III. Econometric analysis Use of technologies and hourly electricity prices in Spain for 2005-2007 (Source: REE and OMEL) Test for unit roots (Augmented Dickey Fuller) Seasonality ΔELECPRICEt = β0 + β1 ΔTOTDEMt + β2 ΔSPREGIMEt + β3 ΔHIDROt + β4 ΔNUCLEARt + β5 ΔCOALt + β6 ΔCOMBCYCLEt + β7 ΔFUELGASt + β8 dummy_d1t+ + β13 dummy_d6t + β14 dummy_m1t + + β24 dummy_m11t + β25 dummy_y1t + β26 dummy_y2t + u t
IV. Results OLS estimation of daily changes in electricity prices Dependent variable: ΔELECPRICEt (1) (2) (3) (4) ΔTOTDEMt 1.607*** (0.142) 1.655*** (0.123) 3.854*** (0.456) ΔSPREGIMEt -2.572*** (0.179) -4.671*** (0.431) ΔHIDROt -2.581*** (0.672) ΔNUCLEARt -3.991*** (0.723) ΔCOALt -2.650*** (0.523) ΔCOMBCYCLEt -3.136*** (0.458) ΔFUELGASt 3.008*** (0.882) WEEKLY DUMMIES Yes Yes Yes Yes MONTHLY DUMMIES Yes Yes Yes Yes ANNUAL DUMMIES Yes Yes Yes Yes OBSERVATIONS 1094 1094 1094 1094 Adjusted R-SQUARED 39.75% 49.67% 68.03% 75.52% All the models include an intercept; Standard errors in parenthesis are robust to heteroscedasticity and serial correlation (Newey and West, 1987); *** indicates p<0.001
IV. Results OLS estimation of daily changes in electricity prices Dependent variable: ΔELECPRICEt (1) (2) (3) (4) ΔTOTDEMt 1.607*** (0.142) 1.655*** (0.123) 3.854*** (0.456) ΔSPREGIMEt -2.572*** (0.179) -4.671*** (0.431) ΔHIDROt -2.581*** (0.672) ΔNUCLEARt -3.991*** (0.723) ΔCOALt -2.650*** (0.523) ΔCOMBCYCLEt -3.136*** (0.458) ΔFUELGASt 3.008*** (0.882) WEEKLY DUMMIES Yes Yes Yes Yes MONTHLY DUMMIES Yes Yes Yes Yes ANNUAL DUMMIES Yes Yes Yes Yes OBSERVATIONS 1094 1094 1094 1094 Adjusted R-SQUARED 39.75% 49.67% 68.03% 75.52% All the models include an intercept; Standard errors in parenthesis are robust to heteroscedasticity and serial correlation (Newey and West, 1987); *** indicates p<0.001
IV. Results OLS estimation of daily changes in electricity prices Dependent variable: ΔELECPRICEt (1) (2) (3) (4) ΔTOTDEMt 1.607*** (0.142) 1.655*** (0.123) ΔSPREGIMEt -2.572*** (0.179) ΔHIDROt ΔNUCLEARt ΔCOALt ΔCOMBCYCLEt 3.854*** (0.456) -4.671*** (0.431) -2.581*** (0.672) -3.991*** (0.723) -2.650*** (0.523) -3.136*** (0.458) ΔFUELGASt 3.008*** (0.882) WEEKLY DUMMIES Yes Yes Yes Yes MONTHLY DUMMIES Yes Yes Yes Yes ANNUAL DUMMIES Yes Yes Yes Yes OBSERVATIONS 1094 1094 1094 1094 Adjusted R-SQUARED 39.75% 46.67% 58.03% 69.52% All the models include an intercept; Standard errors in parenthesis are robust to heteroscedasticity and serial correlation (Newey and West, 1987); *** indicates p<0.001
IV. Results OLS estimation of weekly changes in electricity prices Dependent variable: ΔELECPRICEt (1) (2) (3) (4) ΔTOTDEMt 2.221*** (0.380) 2.034*** (0.335) ΔSPREGIMEt -2.067*** (0.369) ΔHIDROt ΔNUCLEARt ΔCOALt ΔCOMBCYCLEt 1.692* (0.942) -2.130** (0.937) -1.867 (1.372) -1.734 (1.058) -1.448 (1.241) -0.129 (0.086) ΔFUELGASt 6.001*** (1.567) MONTHLY DUMMIES Yes Yes Yes Yes ANNUAL DUMMIES Yes Yes Yes Yes OBSERVATIONS 156 156 156 156 Adjusted R-SQUARED 7.88% 33.69% 51.89% 62.01% All the models include an intercept; Standard errors in parenthesis are robust to heteroscedasticity and serial correlation (Newey and West, 1987); *** indicates p<0.001
IV. Results OLS estimation of weekly changes in electricity prices Dependent variable: ΔELECPRICEt (1) (2) (3) (4) ΔTOTDEMt 2.221*** (0.380) 2.034*** (0.335) ΔSPREGIMEt -2.067*** (0.369) ΔHIDROt ΔNUCLEARt ΔCOALt ΔCOMBCYCLEt 1.692* (0.942) -2.130** (0.937) -1.867 (1.372) -1.734 (1.058) -1.448 (1.241) -0.129 (0.086) ΔFUELGASt 6.001*** (1.567) MONTHLY DUMMIES Yes Yes Yes Yes ANNUAL DUMMIES Yes Yes Yes Yes OBSERVATIONS 156 156 156 156 Adjusted R-SQUARED 7.88% 33.69% 51.89% 62.01% All the models include an intercept; Standard errors in parenthesis are robust to heteroscedasticity and serial correlation (Newey and West, 1987); *** indicates p<0.001
V. Conclusions A marginal increase of 1 GWh of electricity production using renewable energy sources is associated with a reduction of almost 2.5 Euros in electricity prices (around 5% of the average price for the analyzed period).
V. Conclusions A marginal increase of 1 GWh of electricity production using renewable energy sources is associated with a reduction of almost 2.5 Euros in electricity prices (around 5% of the average price for the analyzed period). The model also allows us to compute the average effect on electricity prices resulting from a switch between any two energy sources given a fixed level of electricity demand.
V. Conclusions A marginal increase of 1 GWh of electricity production using renewable energy sources is associated with a reduction of almost 2.5 Euros in electricity prices (around 5% of the average price for the analyzed period). The model also allows us to compute the average effect on electricity prices resulting from a switch between any two energy sources given a fixed level of electricity demand. Extensions: theoretical model, other control variables, simulations.
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Thank you xavier@uvigo.es http://webs.uvigo.es/xavier