Adding more renewable energy sources to the grid could cause wholesale electricity prices to fall between 15% and 39% by 2030, depending on the region, according to a new report from Lawrence Berkeley National Laboratory.
Researchers conducted electricity market simulations for four grid operators: Southwest Power Pool, New York ISO, California ISO and Electric Reliability Council of Texas. Using three scenarios in which wind and solar account for between 40% and 50% of the grid's electricity in 2030, the May 16 report found that average hourly wholesale energy prices decrease as the penetration of renewable sources on the grid rises.
The simulation results show that New York and California's independent system operators would see the biggest price declines. New York prices would be 37% to 39% lower than if wind and solar's shares of total generation remain at their 2016 levels (3% and 1%, respectively). California ISO would see prices drop between 23% and 27%, depending on the level of renewable energy sources on the grid.
In SPP, wind made up 18% of 2016 generation and solar made up 0.1%. Prices would fall 27% by 2030 if solar reached 30% of the grid's power. In ERCOT, wholesale electricity prices would fall 25% by 2030 if wind energy contributed 30% to the grid's electricity supply.
While wholesale prices would fall with more renewables penetration, the report found, price volatility would also increase. In the simulations, with renewables at their 2016 levels of penetration, electricity prices fluctuated by $5-$10/MWh without wide deviations over the course of the day. With wind accounting for 30% of the electricity supply, the price variation increased to $20-$30/MWh, "indicating that energy prices in the morning may be at zero on some days while prices may reach up to $55/MWh on other days," according to the report.
"This increase in price volatility, coupled with the increase in irregularity of prices in most high [variable renewable energy] scenarios, has important effects on other electricity market participants," Berkeley Lab researchers wrote. "Stronger price variability and irregularity will favor flexible resources that can start and stop frequently and on short notice, including storage."
Higher volatility could also make typical time-of-use rate programs from utilities less effective, the researchers found, favoring "more flexible designs."