No. 58: Capturing the economic dynamics of competing power generation sources

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. We also find the competitiveness of natural gas power plants to have either improved or held steady. 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.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin, der Goethe-Universität Frankfurt und der Carl von Ossietzky Universität Oldenburg, die die gleiche Forschungsagenda verfolgen.