Publications
Publications
- October, 2022
- Renewable and Sustainable Energy Reviews
The Economic Dynamics of Competing Power Generation Sources
By: Gunther Glenk and Stefan Reichelstein
Abstract
Competing power generation sources have experienced considerable shifts in both their revenue potential and their costs 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 during the years 2012–2019, primarily due to falling life-cycle costs of production. In California, these gains far outweigh an emerging “cannibalization” effect that results from substantial additions of solar power having made energy less valuable in the middle of the day. As such, intermittent renewables in both states have been approaching or exceeding the break-even value of zero for the estimated LPMs. We also find the competitiveness of natural gas power plants to have either improved in Texas or held steady at negative LPMs in California. For these plants, declining capacity utilization rates have effectively been counterbalanced by a “dispatchability price premium” that reflects the growing market share of intermittent renewables.
Keywords
Renewable Energy; Intermittant; Cost Accounting; Profitability Analysis; Learning-by-doing; Cannibalization Effect; Energy; Environmental Management; Investment; Operations; Technological Innovation; Energy Industry; Utilities Industry; Industrial Products Industry; Manufacturing Industry; Europe; North America; South America; Africa; Asia
Citation
Glenk, Gunther, and Stefan Reichelstein. "The Economic Dynamics of Competing Power Generation Sources." Art. 112758. Renewable and Sustainable Energy Reviews 168 (October, 2022).