Renewable energy penetration and energy security in electricity markets

The transition from fossil fuels to renewable energies such as wind and solar is being encouraged worldwide. Renewable energy investment costs have been dropping, which, combined with growing incentives, has led to a rapid rise in renewable capacity. These changes in the electricity market entail great challenges and uncertainties, specifically due to resource availability. Wind and solar energy depend on seasonal weather conditions to generate energy, such as wind and radiation, respectively. However, few studies have focused on analyzing and measuring the impact of a progressive increase of renewable energy in a short-term electricity market and its effect on energy security. We developed a System Dynamics model to be able to analyze alternative scenarios and levels of uncertainties. We studied the impact of different shares of renewable sources on economic dispatch and energy security through reliability, reserve margin, resilience, and vulnerability measures. High shares of renewable resources (>60%) impact the energy security-reliability (<98%), reserve margin (<-2%), resilience (>4%), and vulnerability-and may lower the spot price due to zero variable costs, which reduce the profitability of conventional firms in the short term and give closure to firms in the middle term and long term. Novelty StatementIn this study, a system dynamics model is proposed to assess the electricity market configuration and the spot price while renewable energy sources (wind and solar) increase and conventional sources fall (hydropower and fossil fuel). Energy security is measured by including energy measures such as reliability, resilience, vulnerability, and reserve margin in a day-ahead market. The penetration of renewable energy creates a horizontal movement of the supply curve to the right, affecting wholesale electricity price, energy security, and firms' profitability. Highlights The effect of different shares of renewable energy in a day-ahead electricity market was studied. Energy security under renewable energy share on economic dispatch was considered.The analyses were performed using a system dynamics model for a theoretical market. High shares of renewable resources may lower the spot price due to zero variable costs. Low spot price reduces the profitability of both conventional and nonconventional firms.

Automated summary

The global transition from fossil fuels to renewable energies like wind and solar is being encouraged, with decreasing investment costs and growing incentives leading to a rapid increase in renewable capacity. However, these changes bring great challenges and uncertainties to the electricity market, specifically due to resource availability.