Fuelling the Energy Transition: The Effect of German Wind and PV Electricity Infeed on TTF Gas Prices

Previous research shows that renewable energies have a direct negative marginal effect on electricity prices. Gas plants play an essential role in the electricity generation in several fuel-based energy systems through balancing out intermittent renewable energies, which is why it is labeled “green” in the EU Taxonomy. We show the substitution effect between renewable energies, wind and PV, and gas, in the context of a threshold model. Applied to daily Dutch natural gas prices (TTF) between 2016 and 2020, we determine the effect of demand/supply price drivers and lay special emphasis on the asymmetric effects of the day-ahead forecasts of wind and PV infeed. Results show a negative marginal effect of the day-ahead wind and PV infeed forecasts on day-ahead natural gas prices. Employing threshold models we find that in regimes with low wind infeed, marginal increases in the wind and PV infeed forecasts decrease gas prices faster than in regimes with high infeed. Our findings further reveal that the day-ahead TTF price is positively associated with heating demand, supplier concentration, coal, and CO\({ }_2\) prices. We discuss these findings in the context of the debate on the usage of gas for the European energy transition.