Renewable energy development: Current landscape, impacts, and goals

Abstract

The expansion of renewable energies, crucial for reducing emissions and transitioning to a decarbonized energy sector, has broad implications. We study how large-scale renewable energy, particularly wind and solar, impacts wholesale electricity prices, carbon emissions, and market competition. After reviewing current trends in renewable adoption, we focus on the Iberian electricity market. Using the methodology of Petersen, Reguant, and Segura (2024), we analyze impacts on prices and emissions on detailed hourly data from the wholesale electricity market for 2016 to 2022. Results show that a GWh increase in wind or solar generation reduces CO₂ emissions between 200 and 300 tons, and prices by an average of 2e/MWh and 4e/MWh, respectively. By examining the evolution of traditional companies’ market shares, we show that as renewable penetration increases, market concentration decreases. The study is complemented by discussing local effects of renewable developments, and challenges to increasing renewable development such as cannibalization, volatility, and intermittency.

Keywords: Renewable energy, Energy transition, Carbon emissions, Electricity prices, Market competition

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