Impact on Electricity Markets: Merit Order Effect of Renewable Energies. Merit Order Effect of Renewable Energies.

The increase in renewable energy sources has contributed to lowering electricity wholesale prices in many markets (although not necessarily retail prices) by causing a shift in the merit order curve and substituting part of the conventional generation, which has higher marginal production costs. This merit order effect, along with priority dispatch, can affect revenues of conventional power plants, especially in Member States experiencing rapid deployment of variable renewables.This chapter quantifies the merit order effect in 2030 and 2050 in European electricity wholesale markets by comparing electricity systems in a Reference and Mitigation Scenario for both years. Scenario results show that the reduction in wholesale electricity price between scenarios is on average 1.6/MWh and 4.2/MWh for 2030 and 2050, respectively. A simplified approach is also used to assess the impact of demand response on system costs.