Estimating the impact of wind generation and wind forecast errors on energy prices and costs in Ireland

Swinand, Gregory P and O'Mahoney, Amy (2014): Estimating the impact of wind generation and wind forecast errors on energy prices and costs in Ireland.

Abstract

This paper studies the impact of wind generation on system costs and prices in Ireland. The need to mitigate climate change, achieve renewables energy targets, and use renewable sources of energy means that many countries are considering greater levels of wind generation in their power generation mix. The overall impact of wind generation on system costs and performance has only been studied recently, and often with limited actual data from power systems with increased wind penetration. The paper uses a unique dataset of half-hourly system demand, generation, wind forecast generation, and actual wind generation, along with Irish system marginal price (SMP) data from 2008 to autumn 2012. An econometric time-series model of SMP as a function of forecast and realized demand and wind generation is formed. The costs of balancing and system constraints are included in the cost of ‘uplift’, and thus the total cost of a variety of factors is included in our estimates for Ireland. Our results suggest that each 1% increase in wind generation reduces SMP in Ireland by about 0.06%, while each 1% wind forecast error increases SMP about 0.02%. In absolute terms, though, at the mean the impact of wind forecast errors is small, or about 0.4€cent/MWh-wind generated. However, the impact per MWh forecast error is about €1.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cost function, econometrics, power generation economics, power system economics, wind power generation
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources

References

M. Black and G. Strbac, "Value of Storage in Providing Balancing Services for Electricity Generation Systems with High Wind Penetration," Journal of Power Sources, vol. 162, pp. 949-953, 2006.

E. Denny and M. O'Malley, "Quantifying the Total Net Benefits of Grid Integrated Wind." Power Systems, IEEE Transactions on 22(2): 605-615, 2007.

F. A. Felder, "Examining Electricity Price Suppression Due to Renewable Resources and Other Grid Investments." The Electricity Journal In Press, Corrected Proof, 2011.

A. O’Mahoney and E. Denny “Electricity Prices and Generator Behaviour in Gross Pool Electricity Markets”, Energy Policy, Volume 63, December 2013, Pages 628-637

N. Troy, E. Denny, et al., "Base-Load Cycling on a System with Significant Wind Penetration." Power Systems, IEEE Transactions on 25(2): 1088-1097, 2010.

Swinand, G.P.; Godel, M.; , "Estimating the impact of wind generation on balancing costs in the GB electricity markets," European Energy Market (EEM), 2012 9th International Conference on the , vol., no., pp.1-8, 10-12 May 2012

R. Gross, P. Heptonstall, D. Anderson, T. Green, M. Leach and J. Skea. (2006). The Costs and Impacts of Intermittency: An assessment of the evidence on the costs and impacts of intermittent generation on the British electricity network. A report of the Technology and Policy Assessment Function of the UK Energy Research Centre.

H. Holttinen, P. Meimborn, A. Orths, B. Lange, M. O’Malley, J. O. Tande, A. Estanqueiro, E. Gomez, L. Soder, G. Strbac, J. C. Smith, and F. van Hulle (2009), “Impacts of Large Amounts of Wind Power on Design and Operation of Power Systems: Results of IEA Collaboration,” IEA Task 25 Homepage. Available at: www.IEAwind.org

Market schedules of the Irish Single Electricity Market. Available: http://www.sem-o.com/Pages/default.aspx

System Demand and Wind Generation Data for the Irish Single Electricity Market. Available: http://www.eirgrid.com/