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The merit order effect of wind and river type hydroelectricity generation on Turkish electricity prices

Acar, Berkan
Selcuk, Orhun
Dastan, Seyit Ali
The environmental concerns and dependency on gas imports push Turkish policy makers to find ways of increasing the share of renewable sources in electricity generation. Providing incentives for renewable energy in the form of feed-in-tariffs is one of the measures to achieve this goal. Basing on the data of Turkish electricity market operator, we quantified the magnitude of the price effects of wind and river type hydro generations on hourly average of day-ahead prices. We find that wind and river type hydro plants reduced the spot electricity prices during the period of 2012-2017, and despite these resources get the same incentives, their impacts on the spot prices and price volatility are different: this can be useful for a more comprehensive cost benefit analysis aimed at differentiating incentive schemes. The paper also discusses possible underlying reasons of these different impacts such as high seasonality of hydro generation and volatility of wind generation. Finally, we show that, assuming more than 75% of the price reductions were reflected into the consumer prices in Turkey, the net impact of wind and river type hydro generation on final consumer prices would be negative. This finding contributes to the discussions on renewable energy incentive mechanisms.