On the Impact of Wind Feed-in and Interconnections on Electricity Price in Germany.

Summary In this paper, we explore carry out an empirical analysis for Germany, as a country with high penetration of wind energy, to investigate the interaction between the well-known merit-order effect, i.e., falling spot price levels as well as highly fluctuating spot prices and the European electricity grids inteconnections,i.e., market coupling. Our main empirical findings suggest that wind power in-feed decreases electricity spot price level but increases spot prices volatility. Furthermore, the relationship between wind power and spot electricity prices can be strongly impacted by European electricity grids interconnection which behaves like a safety valve lowering volatility and limiting the price decrease. Therefore, the impacts of wind generated electricity on electricity spot markets are less clearly pronounced in interconnected systems.