Playing Monopoly with Renewable Energy

The power trading of Renewable energy is a difficult feat. Understanding the market and dodging its risks is a challenging task. But, with the difference and the non-deterministic feature, the market players must have their eyes open.

In several markets around the globe, renewable energy sources are obtaining increased popularity mainly at the cost of a reduction in coal and nuclear power. The cost of changeover these markets to clean energy may be offset or exceeded by savings of not buying fossil fuels. The phenomenon of renewable energy commerce is an emerging topic in the utility sector.

The spread of clean energy trading, mainly wind and solar, has disrupted the pricing dynamics, primarily in wholesale power markets. A one percent loss in GDP is observed by submitting to renewable energy power trading. Legacy firms in citadel regions are becoming more reliant on renewable energy. This has forced businesses to acclimate to the latest asset strategies and trading operations.

The consequences of the increasing demand for renewable energy in the wholesale power market are a few. The most dominant renewable energies are wind and solar energy; these sources are different from fossil fuel-based power generation sources. The main difference is the alternative way of production, which results in a non-deterministic way, as it is unpredictable.

These factors of renewable energy fire a hint of disappointment and present challenges in terms of innovation in sectors like energy storage. Because of its non-deterministic availability, the wholesale power markets exhibited a distaste for trading and generation.

A sudden rise in the renewable energy market in the wholesale power trading scenario occurred, causing a significant penetration with a very different behavior when compared to before. The vast quantities of near-zero variability cost renewable supplies at many hours of the day, and the energy prices have fallen worldwide. There is a chance when renewable energy prices become negative due to an excess of renewables beyond the grid's capacity to absorb.

Many instances have been reported when renewable energy supplies are not created as expected in times of predicted clouds or calmer conditions than anticipated. It is challenging to steer clear of the variation in the real-time energy markets. Energy levels spike to the maximum limits when the same occurs in peak times such as winter or summer.

Due to transmission constraints, these instances' in-depth understanding and occurrence can be noted in localized power markets. More often than not, these are easily solved by investments to expand the inter-regional transfer capacity.

Transmission constraints are likely to occur much more frequently in those places where the markets have historically existed. The newer hindrance emerges if the market has traditionally existed. The large swaths of renewable energy are created in locations with the necessary resources, and fossil plants retire gradually due to the corresponding declines in energy prices. As transmission constraints often concentrate on producing sticky situations in the markets. For example, surpluses of renewable energy can neither be exported nor imported and cannot alleviate deficits of in-region generation. These circumstances allow deviations in power prices in neighboring markets, increasing frequency, and magnitude.