Renewable Penetration, Integration Costs and the Roles of the Power Grids: A Spatial Econometric Analysis for Prefectures in Japan

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Research progress on power market with large-scale renewable energy:1. Japan's winter electricity market prices in 2021 were analyzed using an optimal dispatch model. Results show that natural gas units have a disproportionate impact on electricity prices at different times within a day. Rising natural gas prices result in high electricity prices during evening peak demand when solar power output is low. Therefore, stable and affordable natural gas supply is crucial for the stable operation of the power system and affordability of electricity prices.2. The Vector Error Correction Model (VECM) was used to analyze the cost pass-through of fuel prices to electricity prices within a day. In a power system with large-scale renewable energy, residual electricity demand fluctuates within a day. The Japanese regional electricity supply market for thermal power generation is a central-peripheral type of market, and the cost pass-through ability of regional market-dominant firms fluctuates within a day due to differences in market power. The empirical results of the VECM indicate that when renewable energy output is high, the cost pass-through ability is weak, whereas when renewable energy output is low, the cost pass-through ability is strong in the Japanese wholesale electricity market.