CORE Seminar - Pär Holmberg

10/09/2026 - 12:45 - LIDAM D.251 

Pär Holmberg 

(Research Institute of Industrial Economics, Stockholm) 

will give a presentation on : 

Long-Run Equilibrium Effects of Variable Renewable Electricity 

Abstract : 

 We characterise the long-run competitive equilibrium of an electricity market with free entry, a continuum of thermal technologies, and variable renewable electricity (VRE) whose output may be correlated with demand. As long as some baseload remains in the market, VRE entry leaves the entire price distribution unchanged -- there is no long-run merit-order effect. Still, when demand varies, the output-weighted price received by VRE and the demand-weighted price both fall, irrespective of the correlation. The loss-of-load probability is invariant to VRE entry as long as some thermal capacity remains. For elliptically distributed demand and VRE availability, expected energy not served is proportional to the spread of net demand and therefore rises when VRE entry widens that spread and falls when it narrows it. As long as some zero-marginal-cost baseload remains, a widening spread shifts thermal production towards less efficient technologies and raises operating costs and emissions. The bounds on these increases depend on the dispersion of VRE availability, investment-cost convexity and, for emissions, how emission intensity rises along the merit order. When effective baseload is fossil-based, we instead give sufficient conditions under which VRE lowers operating costs and emissions from the first unit of entry.