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Dead Battery? Wind Power, the Spot Market, and Hydropower Interaction in the Nordic Electricity Market

Johannes Mauritzen

Year: 2013
Volume: Volume 34
Number: Number 1
DOI: 10.5547/01956574.34.1.5
View Abstract

Abstract:
It is well established within both the economics and power system engineering literature that hydropower can act as a complement to large amounts of intermittent energy. In particular hydropower can act as a "battery" where large amounts of wind power are installed. In this paper I use simple distributed lag models with data from Denmark and Norway. I find that increased wind power in Denmark causes increased marginal exports to Norway and that this effect is larger during periods of net exports when it is difficult to displace local production. Increased wind power can also be shown to slightly reduce prices in southern Norway in the short-run. Finally, I estimate that as much as 40 percent of wind power produced in Denmark is stored in Norwegian hydropower magazines.



Emissions Savings from Wind Power Generation in Texas

Daniel T. Kaffine, Brannin J. McBee, and Jozef Lieskovsky

Year: 2013
Volume: Volume 34
Number: Number 1
DOI: 10.5547/01956574.34.1.7
View Abstract

Abstract:
Wind power has the potential to reduce emissions associated with conventional electricity generation. Using detailed, systemic hourly data of wind generation and emissions from plants in ERCOT (Texas), we empirically estimate the SO2,NOx and CO2 emissions offset by wind generation. Our estimation strategy implicitly captures both the marginal unit of generation displaced by wind on the electrical grid, and the marginal emissions reduction from that displaced unit. Our results also reveal substantial variation in emissions reductions, which appear to be strongly driven by differences in the generation mix. The environmental benefits from emissions reductions in ERCOT fail to cover government subsidies for wind generation.



Now or Later? Trading Wind Power Closer to Real Time And How Poorly Designed Subsidies Lead to Higher Balancing Costs

Johannes Mauritzen

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.jmau
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Abstract:
Simulation studies have pointed to the advantages of trading closer to real-time with large amounts of wind power. Using Danish data, I show that, as expected, shortfalls increase the probability of trade on the short-term market, Elbas. But in the period studied between 2010 and 2012 surpluses are shown to decrease the probability of trade. This unexpected result is likely explained by wind power policies that discourage trading on Elbas and lead to unnecessarily high balancing costs. I use a rolling-windows regression to support this claim.



Why Wind Is Not Coal: On the Economics of Electricity Generation

Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.lhir
View Abstract

Abstract:
Electricity is a paradoxical economic good: it is highly homogeneous and heterogeneous at the same time. Electricity prices vary dramatically between moments in time, between location, and according to lead-time between contract and delivery. This three-dimensional heterogeneity has implication for the economic assessment of power generation technologies: different technologies, such as coal-fired plants and wind turbines, produce electricity that has, on average, a different economic value. Several tools that are used to evaluate generators in practice ignore these value differences, including "levelized electricity costs", "grid parity", and simple macroeconomic models. This paper provides a rigorous and general discussion of heterogeneity and its implications for the economic assessment of electricity generating technologies. It shows that these tools are biased, specifically, they tend to favor wind and solar power over dispatchable generators where these renewable generators have a high market share. A literature review shows that, at a wind market share of 30-40%, the value of a megawatt-hour of electricity from a wind turbine can be 20-50% lower than the value of one megawatt-hour as demanded by consumers. We introduce "System LCOE" as one way of comparing generation technologies economically.



The Role of Continuous Intraday Electricity Markets: The Integration of Large-Share Wind Power Generation in Denmark

Fatih Karanfil and Yuanjing Li

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.fkar
View Abstract

Abstract:
This paper suggests an innovative idea to examine the functionality of an intraday electricity market by testing causality among its fundamental components. Using Danish and Nordic data, it investigates the main drivers of the price difference between the intraday and day-ahead markets, and causality between wind forecast errors and their counterparts. Our results show that the wind and conventional generation forecast errors significantly cause the intraday price to differ from the day-ahead price, and that the relative intraday price decreases with the unexpected amount of wind generation. Cross-border electricity exchanges are found to be important to handle wind forecast errors. Additionally, some zonal differences with respect to both causality and impulse responses are detected. This paper provides the first evidence on the persuasive functioning of the intraday market in the case of Denmark, whereby intermittent production deviations are effectively reduced, and wind forecast errors are jointly handled through the responses from demand, conventional generation, and intraday international electricity trade.



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
View Abstract

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
View Abstract

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.



Optimal Allocation of Variable Renewable Energy Considering Contributions to Security of Supply

Jakob Peter and Johannes Wagner

Year: 2021
Volume: Volume 42
Number: Number 1
DOI: 10.5547/01956574.42.1.jpet
View Abstract

Abstract:
Electricity markets are increasingly influenced by variable renewable energy such as wind and solar power, characterized by a pronounced weather-induced variability and imperfect predictability. As a result, the evaluation of the capacity value of variable renewable energy, i.e., its contribution to security of supply, gains importance. This paper develops a new methodology to endogenously determine the capacity value in large-scale investment and dispatch models for electricity markets. The framework allows balancing effects to be accounted for that arise due to the spatial distribution of generation capacities and interconnectors. The practical applicability of the methodology is shown with an application for wind power in Europe. We find that wind power can substantially contribute to security of supply in a decarbonized European electricity system in 2050, with regional capacity values ranging from 1-40%. Analyses that do not account for the temporal and spatial heterogeneity of the contribution of wind power to security of supply therefore lead to inefficient levels of dispatchable back-up capacity. Applying a wind power capacity value of 5% results in an overestimation of firm capacity requirements in Europe by 66 GW in 2050. This translates to additional firm capacity provision costs of 3.8 bn EUR per year in 2050, which represents an increase of 7%.



Increasing or Diversifying Risk? Tail Correlations, Transmission Flows and Prices across Wind Power Areas

Johannes Mauritzen and Genaro Sucarrat

Year: 2022
Volume: Volume 43
Number: Number 3
DOI: 10.5547/01956574.43.3.jmau
View Abstract

Abstract:
As wind power costs have declined, capacity has grown quickly, often times in adjacent areas. Price and volatility risk from wind power's intermittency can be mitigated through geographic diversification and transmission. But wind power generation has a fat-tailed and right-skewed distribution. In this article we investigate how geographic diversification of wind power and the effect of wind power on market prices varies across the distribution of production. In a case study from Denmark and Sweden, we show that during tail-end production periods, correlations between areas increase substantially as does congestion in the transmission network. This leads to highly non-linear price effects. The marginal effect of wind power on the local prices is shown to be substantially higher at the 10th decile of wind power production. This has implications for valuation models of wind power projects and for operations of electricity markets with high penetrations of wind power.



Impact of the Feed-in Tariff Policy on Renewable Innovation: Evidence from Wind Power Industry and Photovoltaic Power Industry in China

Boqiang Lin and Yufang Chen

Year: 2023
Volume: Volume 44
Number: Number 2
DOI: 10.5547/01956574.44.2.blin
View Abstract

Abstract:
Technological innovation is the key to develop wind power and photovoltaic power industries. The feed-in tariff (FIT) policy, as a demand-pull policy, is important to support renewable energy technological innovation. Using the "difference-in-differences" method, this paper investigates the impact of FIT policy of wind power and the impact of the FIT policy designed according to differences in the distribution of resources on wind power technological innovation. The findings show that the FIT policy can drive patenting in wind power technologies during the implementation period, but may play a relatively weak promoting role in technological innovation in the latter term, and the FIT policy designed according to differences in the distribution of resources also stimulates more patent counts. Finally, based on the fixed effect negative binomial regression model, this paper finds that the higher feed-in tariffs can increase the patent counts in photovoltaic power technologies.




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