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Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?

Physical laws mean that it is generally impossible to identify which power stations are exporting to another country, but economic logic offers strong clues. On windy days, Denmark tends to export electricity to its neighbours, and to import power on calm days. Storing electricity in this way thus allows the country to deal with the intermittency of wind generation. We show that this kind of behaviour is theoretically optimal when a region with wind and thermal generation can trade with one based on hydro power. However, annual trends in Denmark's trade follow its output of thermal generation and are inversely related to Nordic production of hydro power and the amount of water available to Scandinavian generators, with no correlation with wind generation. We estimate the cost of volatility in Denmark's wind output to equal between 4% and 8% of its market value. Keywords: Electricity, Wind generation, Hydro generation, Storage, International trade

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Energy Specializations: Electricity – Generation Technologies; Electricity – Markets and Prices ; Renewables – Wind ; Renewables – Policy and Regulation

JEL Codes:
Q2 -
D42 - Market Structure, Pricing, and Design: Monopoly
Q51 - Valuation of Environmental Effects
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

Keywords: Electricity, Wind generation, Hydro generation, Storage, International trade

DOI: 10.5547/01956574.33.3.1

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Published in Volume 33, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.