A combined modeling approach for wind power feed-in and electricity spot prices

Wind power generation and its impacts on electricity prices has strongly increased in the EU. Therefore, appropriate mark-to-market evaluation of new investments in wind power and energy storage plants should consider the fluctuant generation of wind power and uncertain electricity prices, which are affected by wind power feed-in (WPF). To gain the input data for WPF and electricity prices, simulation models, such as econometric models, can serve as a data basis.This paper describes a combined modeling approach for the simulation of WPF series and electricity prices considering the impacts of WPF on prices based on an autoregressive approach. Thereby WPF series are firstly simulated for each hour of the year and integrated in the electricity price model to generate an hourly resolved price series for a year. The model results demonstrate that the WPF model delivers satisfying WPF series and that the extended electricity price model considering WPF leads to a significant improvement of the electricity price simulation compared to a model version without WPF effects. As the simulated series of WPF and electricity prices also contain the correlation between both series, market evaluation of wind power technologies can be accurately done based on these series.     

High penetration wind generation impacts on spot prices in the Australian national electricity market

This paper explores wind power integration issues for the South Australian (SA) region of the Australian National Electricity Market (NEM) by assessing the interaction of regional wind generation, electricity demand and spot prices over 2 recent years of market operation. SA's wind energy penetration has recently surpassed 20% and it has only a limited interconnection with other regions of the NEM. As such, it represents an interesting example of high wind penetration in a gross wholesale pool market electricity industry. Our findings suggest that while electricity demand continues to have the greatest influence on spot prices in SA, wind generation levels have become a significant secondary influence, and there is an inverse relationship between wind generation and price. No clear relationship between wind generation and demand has been identified although some periods of extremely high demand may coincide with lower wind generation. Periods of high wind output are associated with generally lower market prices, and also appear to contribute to extreme negative price events. The results highlight the importance of electricity market and renewable policy design in facilitating economically efficient high wind penetrations.     

The impact of wind generation on the electricity spot-market price level and variance: The Texas experience

The literature on renewable energy suggests that an increase in intermittent wind generation would reduce the spot electricity market price by displacing high fuel-cost marginal generation. Taking advantage of a large file of Texas-based 15-min data, we show that while rising wind generation does indeed tend to reduce the level of spot prices, it is also likely to enlarge the spot-price variance. The key policy implication is that increasing use of price risk management should accompany expanded deployment of wind generation.     

Determining optimal electricity technology mix with high level of wind power penetration

Notwithstanding its variability and limited controllability, wind power is expected to contribute strongly to electricity generation from renewable energy sources in the coming decades. Treating wind power as non-dispatchable by subtracting its output from the original load profile, results in a net load profile, which must be covered by conventional power generation. The screening curve methodology is a first approximation to find the optimal generation technology mix, based on relative cost levels. However, increased variability of the net load profile, due to wind power generation, strongly influences system operation. Therefore a static linear programming investment model is developed to determine the optimal technology mix. This alternative methodology shows a reduced capacity of inflexible generation after including operational constraints to properly account for net load variability. In order to illustrate this methodology, an example is set up, showing the sensitivity with respect to ramp rates of conventional generation, transmission interconnection and energy storage. The comparison of those different sources of system flexibility suggests that energy storage facilities better facilitate the integration of wind power generation.     

Short-term optimal wind power generation capacity in liberalized electricity markets

Mainly because of environmental concerns and fuel price uncertainties, considerable amounts of wind-based generation capacity are being added to some deregulated power systems. The rapid wind development registered in some countries has essentially been driven by strong subsidizing programs. Since wind investments are commonly isolated from market signals, installed wind capacity can be higher than optimal, leading to distortions of the power prices with a consequent loss of social welfare. In this work, the influence of wind generation on power prices in the framework of a liberalized electricity market has been assessed by means of stochastic simulation techniques. The developed methodology allows investigating the maximal wind capacity that would be profitably deployed if wind investments were subject to market conditions only. For this purpose, stochastic variables determining power prices are accurately modeled. A test system resembling the size and characteristics of the German power system has been selected for this study. The expected value of the optimal, short-term wind capacity is evaluated for a considerable number of random realizations of power prices. The impact of dispersing the wind capacity over statistical independent wind sites has also been evaluated. The simulation results reveal that fuel prices, installation and financing costs of wind investments are very influential parameters on the maximal wind capacity that might be accommodated in a market-based manner.     

Potential of trading wind power as regulation services in the California short-term electricity market

A short-term electricity market is usually composed of the energy market and ancillary service market. However, wind power is not allowed to be traded in ancillary service markets although it has been proven technically feasible to be regulation services. This paper aims to explore the market potential of trading wind power as regulation services in the California electricity market. A model for wind power trade in the day-ahead (DA) market is established considering the uncertainties of market prices and wind power. An optimal trading strategy for wind power producers is derived by using an analytical algorithm. Trading wind power as regulation is tested by using actual data and the impacts of market control on the market outcome are discussed. The results show that, based on the current framework of the California electricity market, wind power producers can earn much more money if they bid in the DA energy and regulation markets than if they only bid in the DA energy market. The results also show that the potential to enhance profit for wind power producers is larger in the regulation down market than in the regulation up market.     

The impact of the new investments in combined cycle gas turbine power plants on the Italian electricity price

The paper measures the variation of the electricity price in Italy within the next 10 years due to the recent investment flow in combined cycle gas turbine (CCGT) power plants. It starts by investigating the possibility of decoupling gas and oil prices on the basis of hypotheses about the amount of existing resources and plausible technical substitutability assumptions of the latter with the former. In particular, it is supposed that, in the Italian market, natural gas will play a crucial role which oil has had in power generation. The price of electricity stemming from natural gas is then calculated taking into account the role of the power mix restructuring that derives from the CCGT power plants investments. Under reasonable assumptions, it is shown that a net reduction of at least 17% on the electric price is likely to be expected.     

Pricing offshore wind power

Offshore wind offers a very large clean power resource, but electricity from the first US offshore wind contracts is costlier than current regional wholesale electricity prices. To better understand the factors that drive these costs, we develop a pro-forma cash flow model to calculate two results: the levelized cost of energy, and the breakeven price required for financial viability. We then determine input values based on our analysis of capital markets and of 35 operating and planned projects in Europe, China, and the United States. The model is run for a range of inputs appropriate to US policies, electricity markets, and capital markets to assess how changes in policy incentives, project inputs, and financial structure affect the breakeven price of offshore wind power. The model and documentation are made publicly available.     

High value wind: A method to explore the relationship between wind speed and electricity locational marginal price

Wind and solar resources are, by nature, spatially distributed and temporally variable. The process of siting generators that use these renewable resources and integrating them into the electricity system therefore raises different issues than the same process for combustion facilities does. A method for discovering wind power sites with the highest value to the electricity system was developed and is illustrated here using data for the state of Michigan. This method combines readily available hourly average 10 m wind speed data with wholesale electricity price data, as hourly locational marginal price (LMP). The 10 m wind speed data from 72 sites were extrapolated vertically to 80 m turbine hub height, converted to wind power density, and interpolated horizontally via kriging to reconstruct a continuous surface. LMP data from 178 generator nodes were allocated across space using Thiessen polygons. High LMP was interpreted as a signal of insufficiency or weakness in the electricity system, and wind energy was considered a possible remedy. The method, implemented in a GIS, identifies when and where peaks in LMP and wind power density co-occur and highlights these events as high value. As the drive to incorporate more renewable generators into the electricity system increases, this method will help locate the most desirable sites based on wind resource characteristics and the structure of the larger electricity system. Proposing a new way to think about the value of the wind resource to the electricity system is a primary contribution of this work.     

Testing causal relationships between wholesale electricity prices and primary energy prices

We apply the lag-augmented vector autoregression technique to test the Granger-causal relationships among wholesale electricity prices, natural gas prices, and crude oil prices. In addition, by adopting a cross-correlation function approach, we test not only the causality in mean but also the causality in variance between the variables. The results of tests using both techniques show that gas prices Granger-cause electricity prices in mean. We find no Granger-causality in variance among these variables.     

Electrolysers as a load management mechanism for power systems with wind power and zero-carbon thermal power plant

For an isolated power system the deployment of a large stock of electrolysers is investigated as a means for increasing the penetrations of wind power plant and zero-carbon thermal power plant. Consideration is given to the sizing and utilization of an electrolyser stock for three electrolyser implementation cases and three operational strategies, installed capacity ranges of 20–100% for wind power and 10–35% for zero-carbon thermal power plant (as proportions of the power system’s maximum electrical demand) were investigated. Relative to wind-hydrogen alone, hydrogen yields are substantially increased especially on low-wind days. The average load placed on fossil-fuelled power plant is substantially decreased (while achieving a virtually flat load profile) and the carbon intensity of electricity can be reduced to values of <0.1 kg CO₂/kWh_e. The trade-offs between the carbon intensity of the electricity delivered, the carbon intensity of the hydrogen produced and the daily hydrogen yield are explored. For example (on the variable wind day for Strategy C with respective wind power and zero-carbon thermal power penetrations of 100% and 35%), if the carbon intensity of hydrogen is relaxed from 0 to 3 kg CO₂/kg H₂, the hydrogen yield can be increased from 435 tonnes to 1115 tonnes (which is the energy equivalent of 120% of consumer demand for electricity on that day). The findings suggest that the deployment of electrolysers on both the supply and demand-side of the power system can contribute nationally-significant amounts of zero or low-carbon hydrogen without exceeding the power system’s current maximum system demand.     

Turning the wind into hydrogen: The long-run impact on electricity prices and generating capacity

Hydrogen production via electrolysis has been proposed as a way of absorbing the fluctuating electricity generated by wind power, potentially allowing the use of cheap electricity at times when it would otherwise be in surplus. We show that large-scale adoption of electrolysers would change the shape of the load–duration curve for electricity, affecting the optimal capacity mix. Nuclear power stations will replace gas-fired power stations, as they are able to run for longer periods of time. Changes in the electricity capacity mix will be much greater than changes to the pattern of prices. The long-run supply price of hydrogen will thus tend to be insensitive to the amount produced.     

Winds of change: How high wind penetrations will affect investment incentives in the GB electricity sector

Wind power is widely expected to expand rapidly in Britain over the next decade. Large amounts of variable wind power on the system will increase market risks, with prices more volatile and load factors for conventional thermal plant lower and more uncertain. This extra market risk may discourage investment in generation capacity. Financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind. Increased price risk will also make investment in other forms of low-carbon generation (e.g. nuclear power) more challenging.     

Short-term forecasting of wind speed and related electrical power

Wind speed and the related electrical power of wind turbines are forecasted. The work is focused on the operation of power systems with integrated wind parks. Artificial neural networks models are proposed for forecasting average values of the following 10 min or 1 h. Input quantities for the prediction are wind speeds and their derivatives. Also, spatial correlation of wind speeds and its use for forecasting, are investigated. The methods are tested using data collected over seven years at six different sites on islands of the South and Central Aegean Sea in Greece.     

Evaluation of wind energy potential and electricity generation on the coast of Mediterranean Sea in Egypt

Wind data from 10 coastal meteorological stations along the Mediterranean Sea in Egypt have been used for statistical analysis to determine the wind characteristics. It was found that three stations show annual mean wind speed greater than 5.0 m/s. In order to identify the Weibull parameters for all stations two different methods were applied.The methodical analysis for all stations was done for the corrected monthly and annual mean wind power at a height of 10 m, over roughness class 0 (water). The recommended correlation equation was also stated for Mediterranean Sea zone in Egypt. Also the wind power densities for heights of 30–50 m were calculated for all stations. Three of them are the best locations, namely: Sidi Barrani, Mersa Matruh, and El Dabaa, where these contiguous stations have great abundantly wind energy density.A technical assessment has been made of the electricity generation using WASP program for two commercial turbines (300 kW and 1 MW) considering at the three promising sites. The wind turbine of capacity 1 MW was found to produce an energy output per year of 2718 MW h at El Dabaa station, and the production costs was found 2€ cent/kW h.     

Well-functioning balancing markets: A prerequisite for wind power integration

This article focuses on the design of balancing markets in Europe taking into account an increasing wind power penetration. In several European countries, wind generation is so far not burdened with full balancing responsibility. However, the more wind power penetration, the less bearable for the system not to allocate balancing costs to the responsible parties. Given the variability and limited predictability of wind generation, full balancing exposure is however only feasible conditionally to well-functioning balancing markets. On that account, recommendations ensuring an optimal balancing market design are formulated and their impact on wind generation is assessed. Taking market-based or cost-reflective imbalance prices as the main objective, it is advised that: (1) the imbalance settlement should not contain penalties or power exchange prices, (2) capacity payments should be allocated to imbalanced BRPs via an additive component in the imbalance price and (3) a cap should be imposed on the amount of reserves. Efficient implementation of the proposed market design may require balancing markets being integrated across borders.     

Wind power in the Danish liberalised power market—Policy measures,price impact and investor incentives

Wind power has a strong position at the Danish electricity market, mainly caused by high feed-in tariffs in the 1990s. Investments in new wind-power installations on land, however, have declined dramatically after the Danish electricity market was liberalised in 1999. First, the paper describes how policy measures directed towards wind power have been redesigned to match the liberalised market. Then, we estimate the impact of the redesigned tariffs on the electricity prices. Finally, we assess whether the new tariffs make an incentive to invest in wind power. The paper concludes that the new tariffs not by itself make evidence for the actual Danish recession in new wind-power installations after the electricity reform. The main causes could include a combination of problems in spatial planning, high risk aversion of new wind turbine investors and perhaps more favourable support schemes in other countries.     

Assessing the impact of regulatory reforms on China's electricity generation industry

In the past two decades, China has experienced a series of regulatory reforms in its electricity industry, aimed at improving power production efficiency. The central planning system was broken up and the market-oriented modern enterprise system was established. Furthermore, the former vertically integrated electricity utilities were divested and the generation sector was separated from the transmission and distribution networks. In this paper, we intend to estimate the impact of regulatory reforms on production efficiency of fossil-fired generation plants using the plant-level national survey data collected in 1995 and 2004. Applying the econometric method of Differences-in-Differences, we estimate the effects of these reforms on the demand for inputs of employees, fuel and nonfuel materials. The results show that the net efficiency improvement in labor input associated with the regulatory reforms is roughly 29% and the gains in nonfuel materials are about 35%, while there is no evidence of efficiency gains in fuel input associated with the electricity reforms.     

The effect of spatial dispersion of wind power plants on the curtailment of wind power in the Greek power supply system

To meet the national target of 29% for electricity production from renewable energy sources by 2020 in Greece, effective implementation of massive wind power installed capacity into the power supply system is required. In such a situation, the effective absorption of wind energy production is an important issue in a relatively small and weak power system such as that of Greece, which has limited existing interconnections with neighboring countries. The curtailment of wind power is sometimes necessary in autonomous systems with large wind energy penetration. The absorption or curtailment of wind power is strongly affected by the spatial dispersion of wind power installations. In the present paper, a methodology for estimating this effect is presented and applied for the power supply system of Greece. The method is based on probability theory, and makes use of wind forecasting models to represent the wind energy potential over any candidate area for future wind farm installations in the country. Moreover, technical constraints imposed by the power supply system management, the commitment of power plants and the load dispatch strategies are taken into account to maximize the wind energy penetration levels while ensuring reliable operation of the system. Representative wind power development scenarios are studied and evaluated. Results show that the spatial dispersion of wind power plants contributes beneficially to the wind energy penetration levels that can be accepted by the power system. Copyright © 2009 John Wiley & Sons, Ltd.     

Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain

It is sometimes argued that renewables are “expensive”. However, although it is generally true that the private costs of renewable electricity generation are certainly above those of conventional electricity, that statement fails to consider the social benefits provided by electricity from renewable energy sources (RES-E), including environmental and socioeconomic ones. This paper empirically analyses an additional albeit usually neglected benefit: the reduction in the wholesale price of electricity as a result of more RES-E generation being fed into the grid. The case of wind generation in Spain shows that this reduction is greater than the increase in the costs for the consumers arising from the RES-E support scheme (the feed-in tariffs), which are charged to the final consumer. Therefore, a net reduction in the retail electricity price results, which is positive from a consumer point of view. This provides an additional argument for RES-E support and contradicts one of the usual arguments against RES-E deployment: the excessive burden on the consumer.