Renewable Energy Surplus and Electricity Shadow Pricing in Bangladesh: A Regulated Dispatch Framework

Abstract

The increasing integration of renewable energy into regulated electricity systems creates new challenges for valuing electricity when real-time wholesale market prices are unavailable. This study develops a shadow-pricing framework to examine the relationship between renewable energy surplus, electricity scarcity, and the implicit marginal value of electricity in Bangladesh. The study incorporates solar and wind generation, thermal generation, electricity demand, and a normalized renewable surplus index to distinguish between renewable deficit, balanced, and surplus conditions. The analysis uses high-frequency operational electricity profiles with hourly observations and seasonal comparisons covering selected periods in January, March, June, and August. The results demonstrate that renewable availability generates substantial temporal variation in the implied scarcity value of electricity. Under renewable deficit and balanced conditions, the shadow price remains aligned with the marginal thermal generation cost, whereas increasing renewable surplus progressively reduces the implied shadow price as conventional generation is displaced. Seasonal results reveal substantial differences in the economic implications of renewable surplus despite frequent surplus conditions across all quarters. The strongest average price reduction occurs in the fourth quarter, while the second and third quarters exhibit more frequent surplus but comparatively smaller reductions in the implied shadow price. Hourly results further identify a pronounced intraday pattern, with renewable surplus intensifying during the morning, reaching its strongest level around the late-morning period, and declining during the afternoon and evening. The findings demonstrate that the economic value of renewable electricity depends not only on generation volume but also on timing, marginal generation technology, system absorption capacity, and dispatch conditions. The study provides an analytical basis for coordinating renewable integration with energy storage, demand-side flexibility, transmission planning, and electricity dispatch.