Seasonality in the Impact of Solar Power Generation on the Electricity Price Level and Variability

This study analyzes the impact of introducing solar power generation on wholesale electricity prices by conducting a quantile regression. We use electricity prices, electricity demand, and solar power generation in the Kyushu area of Japan from April 2016 to March 2020, where solar power generation is rapidly increasing than in other areas in Japan. We find a usual merit-order effect that an increase in electricity demand raises electricity prices, while an increase in solar power generation reduces electricity prices. However, their effects on electricity price quantiles differ by season. More importantly, the effect of solar power generation on reducing electricity price variability is greater in spring and summer. This is presumably due to the changing correlation between electricity demand and solar power generation through the seasons. Understanding such seasonality of solar power's impact on electricity prices is important to accurately value solar power generation and assess the risk in electricity prices