“Are Renewable Generators Price Responsive?”
Harrison Fell (North Carolina State University), J Scott Holladay (University of Tennessee, Knoxville), and Daniel Kaffine* (University of Colorado, Boulder)
We examine the generation responsiveness of renewable firms to variation in short-run electricity prices. Pairing 15-minute generation data for individual renewable generators in Texas with spatially-detailed meteorological data, we find that renewable firms increase their generation in response to high day-ahead market prices, holding wind and solar resources constant. That is, for two otherwise identical days in terms of wind speeds and solar irradiance, firms increase wind and solar capacity factors on high price days by as much as 20% of their mean values. Price-responsiveness is greatest for renewable firms that a) are not receiving production tax credits and b) sell their entire output as merchant generators into wholesale markets, consistent with theoretical predictions. In light of potentially significant future price changes due to rapid renewable expansion and electrification, our estimates reveal an overlooked intensive margin of adjustment by renewable firms.