Bushnell, James and Novan, Kevin “Setting With The Sun: The Impacts Of Renewable Energy On Wholesale Power Markets” (August 2018) | WP-292 | Abstract
Grid scale solar output has dramatically expanded in California over the last 5 years, transforming the California power market and the economics of electricity generation. Bushnell and Novan find that, while the solar expansion has lowered wholesale electricity prices on average, it has increased wholesale prices during morning and evening periods. There are two important implications of these findings. First, the California wholesale market is adjusting to the variable supply of renewables in a way that favors more flexible conventional generation that can fill the gaps in supply left by variable renewable resources. Second, the market value of renewable resources, as captured by the wholesale market, is rapidly diminishing with each additional MW of solar capacity added to the California grid.