The School of Economics invites you to an AERE Reading group seminar by Gordon Leslie (Monash University).

Dynamic Costs and Market Power: The Rooftop Solar Transition in Western Australia

Abstract

Policy arguments for solar panel subsidies are tied to their ability to displace production from polluting thermal (fossil-fuel-fired) generators. Because thermal generators must incur meaningful costs to ramp production, we show that solar/thermal substitution impacts are not confined to daylight hours. During the rapid rooftop solar growth in Western Australia (2015-2018), our estimates of the dynamic cost structure for the thermal fleet reveals that their total fuel expenditures fell 10%, but revenues increased 3%. Generators displaced by solar output face a cost barrier to start up and compete at sunset, increasing the ability for operating generators to exercise market power.

Link to full paper: Jha_Leslie_WA