The impact of solar photovoltaic energy on prices

The growth of renewable energies, especially solar photovoltaic energy, is transforming the price profile of the electricity market in Spain. The clear influence of solar energy stands out, with prices falling during the hours of maximum solar radiation from 2021. Although wind energy also has an impact on prices, its variability makes it less evident in the average hourly profile.

Impact of solar photovoltaic energy on prices

As expected, and already known, the increase of renewable energies in the electricity generation mix in the Spanish peninsular territory has a clear impact on wholesale electricity market prices.

Solar photovoltaic energy has the most visible impact on the hourly profile of electricity market prices. This is due to the relatively fixed pattern of solar energy production, which concentrates its output during the hours of highest solar radiation. As solar energy production is always concentrated at the same times of the day, its impact on the hourly price profile is clearly visible.

The graphs show how, from 2021 onwards, prices in the central hours of the day begin to fall with respect to prices outside the solar hours. Non-manageable renewable energies, which have zero opportunity cost, offer their energy to the market at zero or very low prices, thus pushing down market prices as their production increases.

It can also be seen that the impact of solar energy on prices is greater in the summer months, although it is also noticeable in the spring and fall, when solar radiation is greater.

Wind energy does not go unnoticed either

Wind energy has a price impact similar to solar photovoltaic energy. But its impact is not visible in the average hourly profile, since wind energy is much more variable and has a less stable hourly profile. So its impact on the average profile is not visible. However, its effect on market prices is clear. On days and months with higher wind energy production, prices are significantly lower than when wind energy production is lower.