Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market

This study investigates the asymmetric impacts of electricity generation from renewables on wholesale electricity prices for the Indian electricity market. The existence of a non-linear cointegration and asymmetric effects of renewables on wholesale electricity price is examined by employing a non-linear autoregressive distributed lag modelling framework. The dataset is high-frequency (15-min time block) time series data with 29,008 observations from 01-August-2020 to 31-July-2021. The empirical results reveal a non-linear cointegrating relationship between wholesale electricity price and electricity generation from renewables (combining all sources), and between wholesale electricity price and electricity generation from solar/wind sources. The findings show that responses in wholesale electricity price due to positive and negative shocks in electricity generation from solar/wind are asymmetric. However, the impact of hydro sources on wholesale electricity prices is insignificant. The dynamic multiplier plots indicate that negative shocks in electricity generation from solar/wind sources have a greater and longer impact on wholesale electricity prices than positive shocks. These findings are novel and suggest that such asymmetries must be recognized in identifying the optimal electricity generation fuel mix for India. (c) 2022 Elsevier Ltd. All rights reserved.

Automated summary

This study investigates the asymmetric impacts of electricity generation from renewables on wholesale electricity prices in the Indian electricity market. The findings reveal a non-linear cointegrating relationship between electricity prices and renewables, with asymmetric effects observed in the response to positive and negative shocks in solar/wind generation. Hydro sources, however, have an insignificant impact on prices. These novel findings emphasize the need to recognize such asymmetries when determining the optimal fuel mix for electricity generation in India.