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Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets

Arthur Henriot

Year: 2014
Volume: Volume 35
Number: Number 1
DOI: 10.5547/01956574.35.1.6
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Abstract:
This paper evaluates the benefits for an agent managing the wind power production within a given power system to trade in the intraday electricity markets, in a context of massive penetration of intermittent renewables. Using a simple analytical model we find out that there are situations when it will be costly for this agent to adjust its positions in intraday markets. A first key factor is of course the technical flexibility of the power system: if highly flexible units provide energy at very low prices in real-time there is no point in participating into intraday markets. Besides, we identify the way wind production forecast errors evolve constitutes another essential, although less obvious, key-factor. Both the value of the standard error and the correlation between forecasts errors at different gate closures will determine the strategy of the wind power manager. Policy implications of our results are the following: low liquidity in intraday markets will be unavoidable for given sets of technical parameters, it will also be inefficient in some cases to set discrete auctions in intraday markets, and compelling players to adjust their position in intraday markets will then generate additional costs.



The Impacts of Variable Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices

Jan Horst Keppler, Sebastien Phan, and Yannick Le Pen

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.jkep
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Abstract:
This paper estimates the impact of two separate factors on the spread between French and German electricity prices, the amount of production by variable renewables and "market coupling". As renewable electricity production is concentrated during a limited number of hours with favourable meteorological conditions and interconnection capacity between France and Germany is limited, increases in production of wind and solar PV in Germany lead to increasing price spreads between the two countries. Our estimates based on a sample of 24 hourly French and German day-ahead prices from November 2009 to June 2013 confirm that renewable electricity production in Germany has a strongly positive impact on price divergence. On the other hand, market coupling, the establishment of a combined order book on the basis of information of both markets, which was introduced in November 2010, can be shown to have mitigated the observed price divergence. Both results have policy relevant implications for welfare and the optimal provision of interconnection capacity.



Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California

Frank A. Wolak

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.SI2.fwol
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Abstract:
Hourly plant-level wind and solar generation output and real-time price data for one year from the California ISO control area is used to estimate the vector of means and the contemporaneous covariance matrix of hourly output and revenues across all wind and solar locations in the state. Annual hourly output and annual hourly revenues mean/standard deviation efficient frontiers for wind and solar resource locations are computed from this information. For both efficient frontiers, economically meaningful differences between portfolios on the efficient frontier and the actual wind and solar generation capacity mix are found. The relative difference is significantly larger for aggregate hourly output relative to aggregate hourly revenues, consistent with expected profit-maximizing unilateral entry decisions by renewable resource owners. Most of the hourly output and hourly revenue risk-reducing benefits from the optimal choice of locational generation capacities is captured by a small number of wind resource locations, with the addition of a small number of solar resource locations only slightly increasing the set of feasible portfolio mean and standard deviation combinations. Measures of non-diversifiable wind and solar energy output and revenue risk are computed using the actual market portfolio and the risk-adjusted expected hourly output or hourly revenue maximizing portfolios.



Renewable Generation Capacity and Wholesale Electricity Price Variance

Erik Paul Johnson and Matthew E. Oliver

Year: 2019
Volume: Volume 40
Number: Number 5
DOI: 10.5547/01956574.40.5.ejoh
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Abstract:
The share of electric power generated from renewable energy sources such as wind and solar must increase dramatically in the coming decades if greenhouse gas emissions are to be reduced to sustainable levels. An under-researched implication of such a transition in competitive wholesale electricity markets is that greater wind and solar generation capacity directly affects wholesale price variability. In theory, two counter-vailing forces should be at work. First, greater wind and solar generation capacity should reduce short-run variance in the wholesale electricity price due to a stochastic merit-order effect. However, increasing the generation capacity of these technologies may increase price variance due to an intermittency effect. Using an instrumental variables identification strategy to control for endogeneity, we find evidence that greater combined wind and solar generation capacity is associated with an increase in the quarterly variance of wholesale electricity prices. That is, the intermittency effect dominates the stochastic merit-order effect.



Intermittency and CO2 Reductions from Wind Energy

Daniel T. Kaffine, Brannin J. McBee, and Sean J. Ericson

Year: 2020
Volume: Volume 41
Number: Number 5
DOI: 10.5547/01956574.41.5.dkaf
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Abstract:
Using detailed 5-minute electricity generation data, we examine the impact of wind intermittency on carbon dioxide (CO2) emissions savings from wind energy in the Southwest Power Pool from 2012�2014. Parametric and semi-parametric analysis confirms concerns that intra-hour wind intermittency reduces CO2 emissions savings from wind�in the top decile of wind intermittency, emission savings are reduced by nearly 10 percent. However, the average wind intermittency effect on emission savings is modest, on the order of 6.5 percent when accounting for dynamic effects. Evidence suggests the intermittency effect is likely to remain modest in the near-term.



The Impact of Renewable Energy Generation on the Spot Market Price in Germany: Ex-Post Analysis using Boosting Method

Alexander Ryota Keeley, Ken’ichi Matsumoto, Kenta Tanaka, Yogi Sugiawan, and Shunsuke Managi

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.akee
View Abstract

Abstract:
This study combines regression analysis with machine learning analysis to study the merit order effect of renewable energy focusing on German market, the largest market in Europe with high renewable energy penetration. The results show that electricity from wind and solar sources reduced the spot market price by 9.64 €/MWh on average during the period from 2010 to 2017. Wind had a relatively stable impact across the day, ranging from 5.88 €/MWh to 8.04 €/MWh, while the solar energy impact varied greatly across different hours, ranging from 0.24 €/MWh to 11.78 €/MWh and having a stronger impact than wind during peak hours. The results also show characteristics of the interactions between renewable energy and spot market prices, including the slightly diminishing merit order effect of renewable energy at high generation volumes. Finally, a scenario-based analysis illustrates how different proportions of wind and solar energies affect the spot market price.





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