(In)flexibility in Power Markets with Supply from Variable Renewable Sources
With the deployment of variable renewable sources such as wind or solar photovoltaic power, electricity markets face increasing inflexibility constraints, or, in other words, increasing difficulties to swiftly adjust demand or supply in order to keep the grid in balance. The weather dependent variable renewable technologies introduce new challenges into power systems, which now must cater not only the relatively inflexible power demand but also the variation in wind and solar photovoltaic power supply.
As their output is only set to increase, it is important to understand how variable renewable sources reshape power markets and their flexibility needs. To shed more light on this topic, this dissertation puts forward a series of four studies which scrutinise the flexibility of power markets in relation to the growing supply from variable renewable sources. The dissertation teaches us that supply from variable renewable sources affects the flexibility needs of a power market by changing the probability distribution function of power prices and altering the relation between forward and spot power prices, reducing the power price forward premium.
There is one key message that emerges from this dissertation: in a world with more variable renewables the flexibility needs of power markets increase. Thus, to integrate more wind and/or solar photovoltaic power supply, we need to incentivise the deployment of flexibility offering assets. Besides building upon the existing energy finance literature, the insights presented throughout this thesis aim to help policy makers and risk managers better assess the flexibility needs of the power markets.