Enhancing the direct sales of intermittent renewable electricity production: Efficiency considerations of a German market rule

This paper analyzes the competitive effect of two distinct marketing options for renewable electricity. I consider (1) a marketing regime that requires an independent system operator to transfer all available renewable electricity at zero prices to the spot market, and (2) a marketing regime where renewable plant operators directly sell their electricity on the spot or forward market. Similar marketing options coexist in Germany. I find that the dumping of renewable electricity at zero prices on the spot market is more beneficial for competition but bares the risk of negative prices at low levels of demand. Under the direct selling of renewable electricity, negative prices will not occur. However, selling renewable electricity directly can lead to substantially higher prices compared to dumping.