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Please use this identifier to cite or link to this item: http://purl.umn.edu/253733

Title: Wind, Storage, Interconnection and the Cost of Electricity Generation
Authors: Di Cosmo, Valeria
Malaguzzi Valeri, Laura
Authors (Email): Di Cosmo, Valeria (valeria.dicosmo@feem.it)
Keywords: Wind Generation
Constraints
Storage
Interconnection
Subsidies
JEL Codes: L94
Q42
Issue Date: 2017-03-03
Series/Report no.: ESP
10.2017
Abstract: We evaluate how increasing wind generation affects wholesale electricity prices, balancing payments and the cost of subsidies using the Irish Single Electricity Market (SEM) as a test system, with hourly data from 1 January 2008 to 28 August 2012. We model the spot market using a system of seemingly unrelated regressions (SUR) where the regressions are the 24 hours of the day. Wind has a negative impact on the system marginal price, with every MWh increase in wind generation (equal to about 0.2% of the average wind generation in our sample) leading to a decrease of the system marginal price of €0.018/MWh, or about 0.3% of its average value. We use time series models to analyse the balancing market and show that wind generation increases balancing payments, as do the forecast errors of demand and wind. Every MWh of additional wind generation is associated with an increase in constraint payments of €3.2, or about 0.01%. Lack of storage increases the impact of wind on balancing payments whereas the lack of interconnection has no effect. Overall, wind decreases costs through its effect on the electricity price more than it increases constraint payments, even when storage is on outage. The effect of wind remains positive after including the cost of subsidies given to wind generation.
URI: http://purl.umn.edu/253733
Institution/Association: Fondazione Eni Enrico Mattei (FEEM)>ESP: Energy Scenarios and Policy
Total Pages: 41
Collections:ESP: Energy Scenarios and Policy

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