Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/242829
Authors: 
Glenk, Gunther
Reichelstein, Stefan
Year of Publication: 
2021
Series/Report no.: 
ZEW Discussion Papers No. 21-065
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.
Subjects: 
Renewable Energy
Intermittency
Dispatchable Power
Levelized Cost
Profit Margins
JEL: 
M1
O33
Q41
Q42
Q48
Q54
Q55
Document Type: 
Working Paper

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