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Abstract
Earlier research has shown that adding wind capacity to a network can lower the
total annual operating cost of meeting a given pattern of loads by displacing conventional
generation. At the same time, the variability of wind generation and the
need for higher levels of reserve generating capacity to maintain reliability standards
impose additional costs on the system that should not be ignored. The important implication
for regulators is that the capacity payments [“missing money”] for eachMW
of peak system load is now much higher. Hence, the economic benefits to a network
of using storage, controllable load and other mechanisms to reduce the peak system
load will be higher with high penetrations of wind generation. These potential benefits
are illustrated in a case study using a test network and a security constrained OPF
with endogenous reserves (SuperOPF). The capabilities of the SuperOPF provide a
consistent economic framework for evaluating Operating Reliability in real-time markets
and System Adequacy for planning purposes. The scenarios considered make it
possible to determine 1) the amount of conventional generating capacity needed to
meet the peak system load and maintain System Adequacy, and the amount of wind
dispatched, 2) total payments by customers in the Wholesale Market, and the amount
of missing money paid to generators to maintain their Financial Adequacy, 3) changes
in the congestion rents for transmission that are collected by the system operator, and
finally, 4) the total annual system costs paid by customers directly in the Wholesale
Market and, indirectly, as missing money. The results show that the benefits (i.e.
the reduction in the total annual system costs) from making an investment in wind
capacity and/of upgrading a tie line are very sensitive to 1) how much of the inherent
variability of wind generation is mitigated, and 2) how the missing money paid
to conventional generators is determined (e.g. comparing a regulated market with a
deregulated market).