Cannibalization, depredation, and market remuneration of power plants

The decarbonization strategy of the electricity sector relies on renewable energy. However, increasing renewables gives cannibalization and depredation effects. Cannibalization appears when increasing penetration of renewables undermines their own market remuneration. Depredation arises when increased renewable penetration undermines the market remuneration of other technologies. This paper documents cannibalization and depredation effects in the Spanish electricity market from 2014 to 2020. Increases in wind and solar penetration reduce market remuneration of all technologies. With wind, depredation and cannibalization effects are non-linear. Higher solar and wind penetration reduces remuneration volatility to wind, solar, and gas but increases those of coal and nuclear. • Increases in solar and wind penetration reduce market remuneration to all plants. • Increases in wind penetration beyond 30–40% have a non-linear and stronger effect. • Renewable penetration lowers (increases) renewables' (thermals') remuneration volatility. • Cannibalization does not support new investments in renewable energy generation. • The policy recommendation is to base the market remuneration on long-term prices.