  The average revenue, or market value, of wind and solar energy tends to fall
with increasing market shares, as is now evident across European electricity
markets. At the same time, these markets have become more interconnected. In
this paper, we empirically study the multiple cross-border effects on the value
of renewable energy: on one hand, interconnection is a flexibility resource
that allows to export energy when it is locally abundant, benefitting
renewables. On the other hand, wind and solar radiation are correlated across
space, so neighboring supply adds to the local one to depress domestic prices.
We estimate both effects, using spatial panel regression on electricity market
data from 2015 to 2023 from 30 European bidding zones. We find that domestic
wind and solar value is not only depressed by domestic, but also by neighboring
renewables expansion. The better interconnected a market is, the smaller the
effect of domestic but the larger the effect of neighboring renewables. While
wind value is stabilized by interconnection, solar value is not. If wind market
share increases both at home and in neighboring markets by one percentage
point, the value factor of wind energy is reduced by just above 1 percentage
points. For solar, this number is almost 4 percentage points.
