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Texas's windfarm construction continues unabated, despite wind energy's cannibalization effect on wind generation's investment incentive and the rising popularity of short-term wind power purchase agreements (PPAs). Using ERCOT's monthly data for Jan-2011 to Dec-2021, we develop spot energy price forecasts by time of day (TOD) and their standard deviations to derive the efficient frontiers (EFs) for spot and forward energy sales of a risk-averse windfarm developer under a short-term wind PPA of not more than ten years. These EFs reveal a windfarm's operating revenue forecast tends to increase with the PPA's forward energy prices. Further, the windfarm's revenue risk and forecast move in tandem, akin to the risk-return relationship rooted in Markowitz's portfolio theory. Hence, the developer tends to sell one hundred percent (<100%) of the windfarm's energy output at forward energy prices that are above (below) spot energy price forecasts by TOD for recovering wind generation's levelized cost of energy. JEL Classification: Q41, Q42, Q47, Q48 [ABSTRACT FROM AUTHOR]

Accurate estimates of the price responsiveness of residential, commercial, and industrial electricity demands are essential for energy policy modelling, integrated resource planning, and determining a competitive wholesale electricity market's generation levels, prices, and capacity investments. Hence, we estimate the own-price elasticities of solar and wind capacity demands of a load serving entity (LSE) that provides retail electricity service, thereby answering two interrelated research questions: (1) does solar capacity demand far exceed wind capacity demand? and (2) are solar and wind capacity demands price-elastic? Inspired by the theory of input demand under input price uncertainty, our innovative methodology integrates (a) wholesale spot energy price forecasts by time of day; (b) pseudo data found by minimizing a LSE's annual risk-adjusted budget for procuring solar and wind capacities; and (c) econometric analysis of (b) to estimate the extent of substitutability between solar and wind capacities and the own-price elasticities of solar and wind capacity demands. Using Texas as an illustrative example, we find that when solar and wind power purchase agreements have similar energy prices, solar capacity demand is approximately four times wind capacity demand. Further, the own-price elasticity estimates are −5.34 for solar capacity demand and −5.65 for wind capacity demand. As a result, solar and wind capacity demands tend to substantially grow (shrink) in response to declining (rising) solar and wind energy prices. This lends support to proposals to raise solar and wind energy prices for mitigating the adverse effects of large-scale variable renewable energy development on an electric grid's efficient operation and system reliability. However, adopting such proposals also slows the grid's pace of decarbonization, thus underscoring the policy and regulatory challenges in the quest for a clean and sustainable electricity future. Hence, our policy recommendation of price managing solar and wind capacity demands is a topic of policy debate that deserves the attention of an electric grid's stakeholders. [ABSTRACT FROM AUTHOR]