Optimal operation of a wind-electrolytic hydrogen storage system in the electricity/hydrogen markets

Wind power, the most promising renewable energy source in the world, plays an important role in the electricity markets. Wind power curtailment cannot be avoided in some countries due to its output has a special feature of randomness and volatility. Since the excess wind power being converted into hydrogen and sold to the hydrogen market will be the future trend. This study proposes a wind-electrolytic hydrogen storage system to participate in the electricity/hydrogen markets for selling electricity and hydrogen, which can help to improve the benefits of wind power in the electricity markets and addree the wind power curtailment effectively. With considering the uncertainties of wind power outputs and electricity prices, the optimal operation strategy is proposed with the objective of maximizing profits. The scenario-based stochastic method is adopted to describe the uncertainties, and the financial risk is evaluated using conditional value-at-risk. The operational problem of the proposed system is formulated into a mixed-integer linear programming model. Finally, the feasibility of the proposed operational strategy is validated by a case study. The results show that the expected revenue increases with the increase of the hydrogen selling price, indicating that investors can obtain profits by converting electricity into hydrogen. The optimal expected revenue increases by 33.42% when hydrogen price increases from 1.2 DKK/kWh to 1.8 DKK/kWh and the risk factor is equal to 0. Based on the analysis of the results, the importance of hydrogen can be proven.     

Does renewable energy generation decrease the volatility of electricity prices? An analysis of Denmark and Germany

Although variable renewable energy (VRE) technologies with zero marginal costs decrease electricity prices, the literature is inconclusive about how the resulting shift in the supply curves impacts price volatility. Because the flexibility to respond to high peak and low off-peak prices is crucial for demand-response applications and may compensate for the losses of conventional generators caused by lower average prices, there is a need to understand how the penetration of VRE affects volatility. In this paper, we build distributed lag models with Danish and German data to estimate the impact of VRE generation on electricity price volatility. We find that in Denmark wind power decreases the daily volatility of prices by flattening the hourly price profile, but in Germany it increases the volatility because it has a stronger impact on off-peak prices. Our analysis suggests that access to flexible generation capacity and wind power generation patterns contribute to these differing impacts. Meanwhile, solar power decreases price volatility in Germany. By contrast, the weekly volatility of prices increases in both areas due to the intermittency of VRE. Thus, policy measures for facilitating the integration of VRE should be tailored to such region-specific patterns.     

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.     

How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?

In the short run, it is well known that increasing wind penetration is likely to reduce spot market electricity prices due to the merit order effect. The long run effect is less clear because there will be a change in new capacity investment in response to the wind penetration. In this paper we examine the interaction between capacity investment, wind penetration and market power by first using a least-cost generation expansion model to simulate capacity investment with increasing amounts of wind generation, and then using a computer agent-based model to predict electricity prices in the presence of market power. We find the degree to which firms are able to exercise market power depends critically on the ratio of capacity to peak demand. For our preferred long run generation scenario we show market power increases for some periods as wind penetration increases however the merit order counteracts this with the results that prices overall remain flat. Returns to peakers increase significantly as wind penetration increases. The market power in turn leads to inefficient dispatch which is exacerbated with large amounts of wind generation.     

Pumped storage in systems with very high wind penetration

This paper examines the operation of the Irish power system with very high levels of wind energy, with and without pumped storage. A unit commitment model which accounts for the uncertainty in wind power is used. It is shown that as wind penetration increases, the optimal operation of storage depends on wind output as well as load. The main benefit from storage is shown to be a decrease in wind curtailment. The economics of the system are examined to find the level at which storage justifies its capital costs and inefficiencies. It is shown that the uncertainty of wind makes the option of storage more attractive. The size of the energy store has an impact on results. At lower levels of installed wind (up to approximately 50% of energy from wind in Ireland), the reduction in curtailment is insufficient to justify building storage. At greater levels of wind, storage reduces curtailment sufficiently to justify the additional capital costs. It can be seen that if storage replaces OCGTs in the plant mix instead of CCGTs, then the level at which it justifies itself is lower. Storage increases the level of carbon emissions at wind penetration below 60%.     

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.     

The large-scale integration of wind generation: Impacts on price,reliability and dispatchable conventional suppliers

This work examines the effects of large-scale integration of wind powered electricity generation in a deregulated energy-only market on loads (in terms of electricity prices and supply reliability) and dispatchable conventional power suppliers. Hourly models of wind generation time series, load and resultant residual demand are created. From these a non-chronological residual demand duration curve is developed that is combined with a probabilistic model of dispatchable conventional generator availability, a model of an energy-only market with a price cap, and a model of generator costs and dispatch behavior. A number of simulations are performed to evaluate the effect on electricity prices, overall reliability of supply, the ability of a dominant supplier acting strategically to profitably withhold supplies, and the fixed cost recovery of dispatchable conventional power suppliers at different levels of wind generation penetration. Medium and long term responses of the market and/or regulator in the long term are discussed.     

The economic benefit of short-term forecasting for wind energy in the UK electricity market

In the UK market, the total price of renewable electricity is made up of the Renewables Obligation Certificate and the price achieved for the electricity. Accurate forecasting improves the price if electricity is traded via the power exchange. In order to understand the size of wind farm for which short-term forecasting becomes economically viable, we develop a model for wind energy. Simulations were carried out for 2003 electricity prices for different forecast accuracies and strategies. The results indicate that it is possible to increase the price obtained by around £5/MWh which is about 14% of the electricity price in 2003 and about 6% of the total price. We show that the economic benefit of using short-term forecasting is also dependant on the accuracy and cost of purchasing the forecast. As the amount of wind energy requiring integration into the grid increases, short-term forecasting becomes more important to both wind farm owners and the transmission/distribution operators.     

Analysis of solar photovoltaic and wind power potential in Afghanistan

Afghanistan has a need for increased access to energy to enable development. In this paper we analyze the potential for large-scale grid-connected solar photovoltaic (PV) and wind power plants in two of Afghanistan's most populous provinces (Balkh and Herat) to meet a large fraction of growing electricity demand. The results presented here represent the first quantitative analysis of potential capacity factors and energy yields of power plants in the country using measured wind speed and typical solar radiation data. Variability of resources is also investigated by comparing temporal profiles with those of electricity demand, using residual load duration curves to determine penetration and curtailment levels for various demand scenarios. We show that solar PV and wind power plants in two provinces could achieve penetration levels of 65%–70% without significant curtailment, which in turn would mean less reliance on unpredictable and unstable power purchase agreements with neighboring countries, longer life of limited domestic fossil fuel resources, and lower imports of diesel fuel, thus avoiding rising costs and detrimental environmental impacts. Our results point to an alternative development pathway from that of previous recommendations for conventional thermal power plants, controversial hydroelectric projects, and a significant dependence on imported power.     

The market value of variable renewables: The effect of solar wind power variability on their relative price

This paper provides a comprehensive discussion of the market value of variable renewable energy (VRE). The inherent variability of wind speeds and solar radiation affects the price that VRE generators receive on the market (market value). During windy and sunny times the additional electricity supply reduces the prices. Because the drop is larger with more installed capacity, the market value of VRE falls with higher penetration rate. This study aims to develop a better understanding on how the market value with penetration, and how policies and prices affect the market value. Quantitative evidence is derived from a review of published studies, regression analysis of market data, and the calibrated model of the European electricity market EMMA. We find the value of wind power to fall from 110% of the average power price to 50–80% as wind penetration increases from zero to 30% of total electricity consumption. For solar power, similarly low value levels are reached already at 15% penetration. Hence, competitive large-scale renewable deployment will be more difficult to accomplish than as many anticipate.     

Assessing the impact of renewable energy sources on the electricity price level and variability – A quantile regression approach

The literature on renewable energy sources indicates that an increase of the intermittent wind and solar generation affects significantly the distribution of electricity prices. In this article, the influence of two types of renewable energy sources (wind and solar photo voltaic) on the level and variability of German electricity spot prices is analyzed. The quantile regression models are built to estimate the merit order effect for different quantiles of electricity prices. The results indicate that both types of renewable generations have a similar, negative impact on the price level, approximated by the price median. When the price volatility, measured by the inter-quantile range (IQR), is considered, the outcomes show that wind and solar influence prices differently. Conditional on the level of the total demand, the wind generation would either increase (when the demand is low) or decrease (when the demand is high) the IQR. Meanwhile, the increase of solar power stabilizes the price variance for moderate demand level. Thus, policy supporting the development and integration of RES should search for a balance between the wind and solar power.     

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.     

The effect of variable renewable energy sources on electricity price volatility: the case of the Iberian market

The relationship between variable renewable energy supply (V-RES) and electricity price volatility is a controversial issue in the economic literature. In general, the literature has been inconclusive about the sign of the impact of installed capacity of these technologies on price volatility. This paper investigates the impact of V-RES on price volatility for the Iberian Market of Electricity (MIBEL), in the period ranging from 2010 to 2015. Using regression analysis and EGARCH models, we conclude that V-RES, and more specifically wind power supply, heightens price volatility. Likewise, greater intraday variability of V-RES also induces higher price volatility. Finally, following an analysis of the connection with the French market, we find that market coupling could help alleviate the sensitivity of price volatility to wind power supply variability.     

Optimizing hydrogen production capacity and day ahead market bidding for a wind farm in Texas

Producing green hydrogen from wind energy is one potential method to mitigate curtailment. This study develops a general approach to examine the economic benefit of adding hydrogen production capacity through water electrolysis along with the fuel cell and storage facilities in a wind farm in north Texas. The study also investigates different day ahead market bidding strategies in the existence of these technologies. The results show that adding hydrogen capacity to the wind farm is profitable when hydrogen price is greater than $3.58/kg, and that the optimal day ahead market bidding strategy changes as hydrogen price changes. The results also suggest that both the addition of a fuel cell to reconvert stored hydrogen to electricity and the addition of a battery to smooth the electricity input to the electrolyzer are suboptimal for the system in the case of this study. The profit of a particular bidding scenario is most sensitive to the selling price of hydrogen, and then the input parameters of the electrolyzer. This study also provides policy implications by investigating the impact of different policy schemes on the optimal hydrogen production level.     

Area price and demand response in a market with 25% wind power

Denmark, east and west of the Great Belt are bidding areas with separate hourly area prices for the Nord Pool power exchange, covering four Nordic countries and parts of Germany. The share of wind power has now increased to 25% on an annual basis in western Denmark. This has a significant impact not only on the electricity wholesale prices, but also on the development of the market. Hourly market data are available from the website of Danish TSO from 1999. In this paper these data are analysed for the period 2004–2010. Electricity generators and customers may respond to hourly price variations, which can improve market efficiency, and a welfare gain is obtained. An important limitation for demand response is events of several consecutive hours with extreme values. The analysis in this paper is a summary and update of some of the issues covered by the EU RESPOND project. It shows that extreme events were few, and the current infrastructure and market organisation have been able to handle the amount of wind power installed so far. This recommends that geographical bidding area for the wholesale electricity market reflects external transmission constraints caused by wind power.     

Electrolysers for mitigating wind curtailment and producing ‘green’ merchant hydrogen

The implementation electrolysis plant in combination with wind power plant is proposed, to absorb wind generation otherwise curtailed while generating ‘green’ hydrogen for the merchant hydrogen market. The objective are to (i) achieve exceptionally high wind power penetrations in future power systems, and (ii) derive hydrogen for sale in the existing merchant industrial market from surplus (zero cost) renewable electricity. The economic rationale is investigated for an isolated power system as a function wind penetration, wind curtailment target, electrolyser cost, hydrogen system efficiency and hydrogen sales price. The main outputs are the total annualized cost of wind power plant with electrolysis plant, net annual revenues and discounted pay-back periods. Unprecedented low values of pay-back period are attainable, relative to the implementation of wind power plant at low wind penetrations (Φ_W). For example, at Φ_W = 50%, a wind curtailment target of 80% allows the investment to be recovered after 4-7 years, provided the hydrogen system efficiency is ≥50% and the hydrogen sales price is 20-30 $/kg. Making use of some non-curtailed wind electricity to boost the utilization of the electrolyser stock is also investigated as a means for improving the return on investment.     

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.     

Private and social benefits of a pumped hydro energy storage with increasing amount of wind power

In this paper, we calculate the long-term profitability of a pumped hydro energy storage (PHES) plant that is planned to be built in an old mine. We model the optimal PHES operation for several scenarios with different wind power penetration levels. Our modelling approach first involves estimating wholesale electricity prices for the day-ahead, intraday and balancing market as a function of wind power penetration. The estimated price profiles are implemented in a dynamic programming model, where the PHES plant maximises its balancing market revenue given the optimal commitment in the day-ahead market. We show that increasing the wind penetration changes the optimal PHES operation and increases the PHES profits. Additionally, we quantify how the costs of wind power balancing are affected by the PHES investment. Policy implications are drawn based on the estimated private and social benefits from the investment.     

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.     

Price volatility and residential electricity decisions: Experimental evidence on the convergence of energy generating source

The recent trend in most developed countries has been toward greater reliance on renewable or “green” energy sources. This paper investigates how price volatility in residential electricity rates impacts consumers' preferences for green power. Using a choice-based experiment, we present respondents with choice scenarios that feature two electric utility plans: (i) a conventional plan where electricity is generated from either coal or natural gas, and (ii) a green plan where electricity is generated renewably from either wind or solar. We then systematically vary the monthly price volatility of each plan across choice scenarios. Our results suggest that price volatility in monthly rates significantly impacts respondents' plan choices and, specifically, their decision to adopt the green power plan. In particular, increased volatility in the green power plan reduces the likelihood of respondents choosing the green plan, while increased volatility in the conventional plan increases the likelihood of respondents choosing the green plan. Moreover, the documented effects of price volatility are robust across different price premiums for the green power plan.