February 2025
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With the continued global rise in investments in renewable energy technologies, the share of these resources in electricity generation has significantly increased. While these technologies provide numerous benefits, such as reducing CO2 emissions, decreasing reliance on fossil fuels, and creating new jobs, there are growing concerns about their direct and indirect negative impacts on electricity markets. If policymakers aim to provide significant amounts of electricity from intermittent renewable sources, it will significantly affect the market, as these resources may not consistently meet demand due to their reliance on natural conditions. Therefore, the growing integration of renewable energy sources (RES) in a restructured electricity market has created challenges, which are explored in this paper. The results indicate that the presence of RES can lead to significant changes in market price behavior. A substantial share of RES in electricity generation capacity results in lower wholesale market prices, higher price spikes, and increased price volatility. Furthermore, an increased share of renewable energy sources may diminish the effectiveness of forward contracts in curbing market power within wholesale electricity markets. Also, the intermittent nature of renewable energy sources, such as solar and wind can increase the cost of ancillary services due to the greater need for storage and emergency supply.