The impact of wind power on electricity prices

This paper investigates the impact of wind power on electricity prices using a production cost model of the Independent System Operator – New England power system. Different scenarios in terms of wind penetration, wind forecasts, and wind curtailment are modeled in order to analyze the impact of wind power on electricity prices for different wind penetration levels and for different levels of wind power visibility and controllability. The analysis concludes that electricity price volatility increases even as electricity prices decrease with increasing wind penetration levels. The impact of wind power on price volatility is larger in the shorter term (5-min compared to hour-to-hour). The results presented show that over-forecasting wind power increases electricity prices while under-forecasting wind power reduces them. The modeling results also show that controlling wind power by allowing curtailment increases electricity prices, and for higher wind penetrations it also reduces their volatility.     

Wind generation and zonal-market price divergence: Evidence from Texas

The extant literature on wind generation and wholesale electricity spot prices says little about how wind generation may affect any price differences between two inter-connected sub-markets. Using extensive data from the four ERCOT zones of Texas, this paper develops a two-stage model to attack the issue. The first stage is an ordered-logit regression to identify and quantify, for example, the impact of wind generation in the West zone on the estimated probability of a positive or negative price difference between the North and West zones. The second stage is a log-linear regression model that identifies and quantifies the estimated impact of wind generation on the sizes of those positive and negative price differences. It is shown that high wind generation and low load in the wind-rich ERCOT West zone tend to lead to congestion and zonal price differences, that those differences are time-dependent, and that other factors such as movements in nuclear generation and natural-gas prices, as well as fluctuating non-West zone loads, also play a role. The results have broad implications for energy policy makers that extend well beyond the borders of Texas and, indeed, those of the United States.     

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.     

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.     

Estimating the value of wind energy using electricity locational marginal price

There is an increasing interest in adding renewables such as wind to electricity generation portfolios in larger amounts as one response to concern about atmospheric carbon emissions from our energy system and the resulting climate change. Most policies with the aim of promoting renewables (e.g., RPS, FIT) do not explicitly address siting issues, which for wind energy are currently approached as the intersection of wind resource, land control, and transmission factors. This work proposes the use of locational marginal price (LMP), the location and time specific cost of electricity on the wholesale market, to signal locations where generation can address electricity system insufficiency. After an examination of the spatial and temporal behavior of LMP in Michigan over the first two years of wholesale market operation, this work combines LMP with wind speed data to generate a value metric. High value sites in Michigan tend to be sites with higher wind speeds, with the bulk of value accruing in the fall and winter seasons.     

Evaluation of wind energy investment interest and electricity generation cost analysis for Turkey

Turkey has remarkable wind energy potential, but its utilisation rate is very low. However, in 2007, energy investors applied to the Energy Market Regulatory Authority (EMRA) with 751 wind projects to obtain a 78180.2 MW wind power plant license. This paper first presents an overview of wind energy development in the world and then reviews related situations in Turkey. Second, to motivate the interest in wind energy investment, new wind power plant license applications in Turkey are analysed. Finally, wind electricity generation cost analyses were performed at 14 locations in Turkey. Capacity factors of investigated locations were calculated between 19.7% and 56.8%, and the production cost of electrical energy was between 1.73 and 4.99 $cent/kW h for two different wind shear coefficients.     

Forward contracts in electricity markets: The Australian experience

Forward contracts play a vital role in all electricity markets, and yet the details of the market for forward contracts are often opaque. In this paper we review the existing literature on forward contracts and explore the contracting process as it operates in Australia. The paper is based on interviews with participants in Australia's National Electricity Market (NEM). The interviews were designed to understand the contracting process and the practice of risk management in the Australian energy-only pool market. This survey reveals some significant gaps between the assumptions made in the academic literature and actual practice in the Australian market place.     

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.     

Successful renewable energy development in a competitive electricity market: A Texas case study

The development of renewable energy in markets with competition at wholesale and retail levels poses challenges not present in areas served by vertically-integrated utilities. The intermittent nature of some renewable energy resources impact reliability, operations, and market prices, in turn affecting all market participants. Meeting renewable energy goals may require coordination among many market players.     

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 distributed lag between electricity demand and price

This paper investigates the lagged relationship between electricity price changes and consumer response. It finds some evidence that price rises can induce rather long-term effects with detectable influence up to a decade. This tentative conclusion is important because it implies that recent increases may have a greater effect on future demand than is normally supposed.     

Comparative impacts of wind and photovoltaic generation on energy storage for small islanded electricity systems

This paper addresses the annual energy storage requirements of small islanded electricity systems with wind and photovoltaic (PV) generation, using hourly demand and resource data for a range of locations in New Zealand. Normalised storage capacities with respect to annual demand for six locations with winter-peaking demand profiles were lower for wind generation than for PV generation, with an average PV:wind storage ratio of 1.768:1. For two summer-peaking demand profiles, normalised storage capacities were lower for PV generation, with storage ratios of 0.613:1 and 0.455:1. When the sensitivity of storage was modelled for winter-peaking demand profiles, average storage ratios were reduced. Hybrid wind/PV systems had lower storage capacity requirements than for wind generation alone for two locations. Peak power for storage charging was generally greater with PV generation than with wind generation, and peak charging power increased for the hybrid systems. The results are compared with those for country-scale electricity systems, and measures for minimising storage capacity are discussed. It is proposed that modelling of storage capacity requirements should be included in the design process at the earliest possible stage, and that new policy settings may be required to facilitate a transition to energy storage in fully renewable electricity systems.     

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.     

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.     

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.     

Evaluation of wind energy potential and electricity generation at six locations in Turkey

In this study, wind characteristics were analyzed using the wind speed data collected of the six meteorological stations in Turkey during the period 2000–2006. The annual mean wind speed of the six stations (Erzurum, Elaz??, Bingöl, Kars, Manisa and Ni?de) is obtained as 8.7, 8.5, 5.9, 6.9, 7.4 and 8.0 m/s at 10 m height, respectively. The mean annual value of Weibull shape parameter k is between 1.71 and 1.96 while the annual value of scale parameter c is between 6.81 and 9.71 m/s. A technical assessment has been made of electricity generation from four wind turbines having capacity of (600 kW, 1000 kW, 1500 kW and 2000 kW). The yearly energy output and capacity factor for the four different turbines were calculated.     

The interaction of wind power generation with electricity demand in the context of a small grid

An investigation into the integration of the intermittent electricity output of a hypothetical wind farm in Malta with the actual electricity demand for one particular year is reported. Available hourly wind data from three sites for 2001 were analysed. The probability density of the load resulting from the reduction of the renewable output from the electricity demand on an hourly basis was determined by a convolution method. The calculated shift in the load duration extends over the whole spectrum of power demand. The equivalent power at the most favourable site was considerably higher than the nominal value commonly in use. In view of the limited availability of sites for wind farms in Malta rotor designs better suited to the lower wind speed régime inland should be considered.     

The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany

The German feed-in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies. Critics state that the costs for consumers are too high. An important aspect to be considered in the discussion is the price effect created by renewable electricity generation. This paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in Germany. The central aspect to be analysed is the impact of renewable electricity generation on spot market prices. The results generated by an agent-based simulation platform indicate that the financial volume of the price reduction is considerable. In the short run, this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits. In the case of the year 2006, the volume of the merit-order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers.     

Estimating the electricity prices,generation costs and CO2 emissions of large scale wind energy exports from Ireland to Great Britain

The share of wind generation in the Irish and British electricity markets is set to increase by 2020 due to renewable energy (RE) targets. The United Kingdom (UK) and Ireland have set ambitious targets which require 30% and 40% of electricity demand to come from RE, mainly wind, by 2020, respectively. Ireland has sufficient indigenous onshore wind energy resources to exceed the RE target, while the UK faces uncertainty in achieving its target. A possible solution for the UK is to import RE directly from large scale onshore and offshore wind energy projects in Ireland; this possibility has recently been explored by both governments but is currently on hold. Thus, the aim of this paper is to estimate the effects of large scale wind energy in the Irish and British electricity markets in terms of wholesale system marginal prices, total generation costs and CO₂ emissions. The results indicate when the large scale Irish-based wind energy projects are connected directly to the UK there is a decrease of 0.6% and 2% in the Irish and British wholesale system marginal prices under the UK National Grid slow progression scenario, respectively.     

Exploring the impact on cost and electricity production of high penetration levels of intermittent electricity in OECD Europe and the USA,results for wind energy

In this study we explore for the USA and OECD Europe (OECD Europe includes the countries that participate in the Organisation of Economic Cooperation and Development, among which Western Europe, USA and Japan) dynamic changes in electricity production, cost and CO₂ emissions when intermittent electricity sources are used with increasing penetration levels. The methodology developed can be applied for both solar photovoltaic (PV) and wind energy. Here the focus of the results is on penetration of wind electricity in the electricity system as simulated in a long-term model experiment in which the electricity demand is kept constant over time. All important parameter are included in a sensitivity analysis. With increasing penetration levels the cost reduction of wind electricity caused by upscaling and technological learning is counteracted by the cost increase due to (1) the need for additional back-up capacity, (2) the need to generate wind electricity at less favourable sites, and (3) discarded wind electricity because of supply–demand mismatch. This occurs after about 20% wind electricity production as percentage of current electricity production. At this level about 500 (OECD Europe) and 750 (USA) TWh yr⁻¹ wind electricity is absorbed in the system with the electricity demand of the year 2000. Wind electricity is found to be discarded when the production is about 55 (USA) to 10 times (OECD Europe) the present electricity produced from wind power. Beyond 30% of present electricity production, cost increases most significantly because of discarded wind electricity, excluding storage. In both regions the use of wind electricity would mainly avoid use of natural gas. The CO₂ emissions abatement costs range from 14 (OECD Europe) to 33 (USA) $ per ton CO₂ differ in both regions due to a faster wind electricity cost increase in OECD Europe.