Electricity Market Transformation in the Renewable Energy Era: A Systematic Review
DOI:
https://doi.org/10.48017/dj.v10ispecial_1.3381Keywords:
renewable energy integration, electricity market stability, price volatility, merit-order effect, heding strategiesAbstract
The integration of renewable energy sources into electricity markets presents both opportunities and challenges, influencing market stability and pricing dynamics. While renewable energy lowers wholesale electricity prices through the merit-order effect, its intermittency contributes to price volatility, requiring advanced hedging strategies and predictive analytics. This systematic review examines the impact of renewable energy integration on market stability and pricing, focusing on mechanisms such as price fluctuations, hedging instruments, demand-side management, and regulatory frameworks. The study follows the PRISMA methodology, utilizing SCOPUS-indexed journal articles published between 2015 and 2025 to ensure academic rigor. Findings reveal that increased renewable penetration reduces electricity prices but amplifies price volatility, necessitating improved financial instruments such as forward contracts, capacity markets, and renewable derivatives. Market power adjustments by dominant energy firms in response to renewable growth influence overall competitiveness, while decentralized energy markets, microgrid optimization, and peer-to-peer electricity trading enhance market resilience. Additionally, cross-border electricity trade remains an underexplored but critical factor in balancing supply-demand mismatches. Regulatory frameworks play a vital role in mitigating instability, with mechanisms like feed-in tariffs, renewable auctions, and carbon pricing influencing investment and market stability. However, misalignment between renewable subsidies and carbon pricing strategies can create unintended market distortions. The study highlights the need for AI-driven forecasting models to improve price predictability and calls for longitudinal analyses to assess the evolving cost-benefit dynamics of decentralized energy adoption. This review provides valuable insights for policymakers, energy regulators, and market participants, offering a comprehensive synthesis of the financial and operational challenges associated with renewable energy integration. The findings contribute to the development of resilient, adaptive market structures that support the transition toward a sustainable and economically viable energy system.
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