Energy Journal, Vol.42, No.1, 171-195, 2021
Locational (In)Efficiency of Renewable Energy Feed-In Into the Electricity Grid: A Spatial Regression Analysis
This paper presents an econometric analysis of curtailment costs of renewable energy sources (RES) in Germany. The study aims at explaining and quantifying the regional variability of RES curtailment, which is a measure to relieve grid overstress by temporarily disconnecting RES from the electricity grid. We apply a Hcckit sample selection model, which corrects bias from non-randomly selected samples. The selection equation estimates the probability of occurrence of RES curtailment in a region. The outcome equation corrects for cross-sectional dependence and quantifies the effect of RES on curtailment costs. The results show that wind energy systems connected to the distribution grid increase RES curtailment costs by 0.7% per MW (or 0.2% per GWh) in subregions that have experienced RES curtailment over the period 2015-2017. The implication of this finding is that policymakers should set price signals for renewables that consider the regional grid overstress, in order to mitigate the cost burden on consumers due to excess generation from RES.