Short- and Long-Run Effects of Wind and Photovoltaic Energy Production on Electricity Prices in Poland

This study investigates the short- and long-run relationships between renewable energy generation, electricity demand, and wholesale electricity prices in Poland. Despite the rapid expansion of renewable energy in Central and Eastern Europe, country-specific evidence on how wind and photovoltaic generation are associated with electricity prices across different time horizons remains limited. Using monthly time-series data from the Polish electricity market, the study employs an Autoregressive Distributed Lag (ARDL) bounds testing approach combined with an Error Correction Model (ECM) to examine short-run dynamics and long-run equilibrium relationships. The results provide evidence of a long-run cointegrating relationship among the variables (Bounds Test F-statistic = 626.54). In the short run, wind generation is negatively and statistically significantly associated with wholesale electricity prices (p < 0.001), a finding that is consistent with the merit-order effect, while electricity demand is positively associated with prices (p = 0.011). Photovoltaic generation does not exhibit a statistically significant short-run relationship with prices. In the long run, the estimated relationships differ from the short-run dynamics, while the statistically significant error-correction coefficient (ADJ = −0.0701, p = 0.033) indicates that approximately 7.01% of the previous period’s disequilibrium is corrected each month. Overall, the findings indicate that the relationships between renewable generation, electricity demand, and wholesale electricity prices vary across time horizons, highlighting the importance of distinguishing short-run price dynamics from long-run equilibrium relationships in the Polish electricity market.