The merit order effect of photovoltaic generation in Slovakia

Photovoltaics in Slovakia have been experiencing a fast development in the last years, benefiting from a large support in various forms - be it generous subsidies and guaranteed feed-in tariff or legal preferential treatment. Due to very low - close to zero marginal costs it may appear that the green energy generated by solar power plants is "free" thus we expect a decrease in the wholesale electricity price. Indeed, in several countries the so- called merit order effect has been proven and the spot price of electricity declines thanks to the generation from the photovoltaics and/or other renewable sources. This thesis evaluates the impact of the solar energy penetration into energy mix on spot prices, seeks evidence of the merit order effect in the Slovak electricity market and quantifies it thanks to publicly available data. The multivariate regression analysis takes into consideration the full years 2011-2016. The merit order effect estimated by an OLS time series model is negative, however, the spot price reduction attributable to the photovoltaics is not sufficient for resulting savings to outweigh the costs of the support scheme borne by end users what implies a consumer loss. Keywords: renewable energy sources, photovoltaics, merit order effect, energy sub­ sidies, feed-in tariff