Cannibalization Effects of Solar and Wind Generation in Texas

Using a large sample of 15-minute data for the 6-year period of 2016-2021, we analyse solar generation’s (SG’s) and wind generation’s (WG’s) per MWh revenues (“revenues” for short hereafter) in the renewable regions of the Electric Reliability Council of Texas (ERCOT). We find that SG’s and WG’s regional average revenues for the day-time hours of 07:00-19:00 exceed the average levelized price of recently signed solar and wind power purchase agreements. However, the same cannot be said about WG’s regional average revenues for the night-time hours of 19:00-07:00. Further, SG’s and WG’s 15-minute regional revenues by time of day move with ERCOT’s cap on the real-time market’s energy price offers, Texas’s regulatory price adder, the US daily wholesale natural gas price, Texas’s 15-minute nuclear generation output, ERCOT’s 15-minute system load, ERCOT’s 15-minute output of regional SG, and ERCOT’s 15-minute output of regional WG. Importantly, SG’s and WG’s revenue reduction ( aka cannibalization) effects in the 2023-2042 period are projected to be offset by revenue increases caused by rising natural gas price, growing demand, and nuclear plant retirement. Hence, market forces may suffice to sustain SG’s and WG’s large-scale development for decarbonizing Texas’s electricity future