The effects of Spain’s transition to renewable energy on the volatility of electricity prices

Abstract

The recent entry of renewable energies in the Spanish electricity market has been controversial, since it has caused some market variations, such as changes in price volatility. Some specialists agree that cleaner energies sources increase price volatility, whereas others disagree. The aim of this project is to understand how the transition towards renewable energies has affected the market and the electricity prices in the last years in Spain, and how can it affect the future of this sector. Through an econometrical model we have observed that price volatility is in fact, directly affected by this energetic transition. Moreover, the data reveals that wind energy generation has a positive regressive relationship with electric price volatility whereas solar energy works in the opposite way, having a negative regressive relation with price volatility.