The impact of variable renewables on price dynamics within wholesale electricity markets

The increasing integration of variable renewable energy sources (VREs) introduces new complexities into the electricity markets. This paper investigates the effects of VREs on price dynamics by utilizing unplanned wind power plant outages as exogenous shocks. Using data from the Turkish electricity market from 2019 to 2023, we examine the short- and long-term impacts of VREs on price dynamics within wholesale electricity markets. Our findings reveal that unplanned outages significantly affect short-term market dynamics, while long-term effects remain limited. The results emphasize the necessity for enhanced grid flexibility, demand response strategies, and energy storage solutions to accommodate the growing share of VREs. • We discuss how VREs affect price dynamics in a developing country context. • We use unplanned wind power plant outages as exogenous shocks. • Empirical results reveal strong short-term effects and limited long-term effects. • The results highlight the need for flexibility and demand response.