Impact of wind farm integration on electricity market prices

Wind generation is considered one of the most rapidly increasing resources among other distributed generation technologies. Recently, wind farms with considerable output power rating are installed. The variability of the wind output power, and the forecast inaccuracy could have an impact on electricity market prices. These issues have been addressed by developing a single auction market model to determine the close to real-time electricity market prices. The market-clearing price was determined by formulating an optimal power flow problem while considering different operational strategies. Inaccurate power prediction can result in either underestimated or overestimated market prices, which would lead to either savings to customers or additional revenue for generator suppliers.     

A combined modeling approach for wind power feed-in and electricity spot prices

Wind power generation and its impacts on electricity prices has strongly increased in the EU. Therefore, appropriate mark-to-market evaluation of new investments in wind power and energy storage plants should consider the fluctuant generation of wind power and uncertain electricity prices, which are affected by wind power feed-in (WPF). To gain the input data for WPF and electricity prices, simulation models, such as econometric models, can serve as a data basis.This paper describes a combined modeling approach for the simulation of WPF series and electricity prices considering the impacts of WPF on prices based on an autoregressive approach. Thereby WPF series are firstly simulated for each hour of the year and integrated in the electricity price model to generate an hourly resolved price series for a year. The model results demonstrate that the WPF model delivers satisfying WPF series and that the extended electricity price model considering WPF leads to a significant improvement of the electricity price simulation compared to a model version without WPF effects. As the simulated series of WPF and electricity prices also contain the correlation between both series, market evaluation of wind power technologies can be accurately done based on these series.     

An equilibrium pricing model for wind power futures

Generation from wind power plants is intermittent and affects profits of wind power generators and conventional generators alike. Currently, generators have limited options for transferring the resulting wind-related volume risks. The European Energy Exchange (EEX) recently introduced exchange-traded wind power futures to address this market imperfection. We propose a stylized equilibrium pricing model featuring two representative agents and analyze equilibrium prices as well as the mechanics behind risk premia for wind power futures. We calibrate and simulate stochastic models for wind power generation, power prices, electricity demand, as well as other relevant sources of uncertainty and use the resulting scenarios to conduct a case study for the German market; analyzing prices, hedging effectiveness, and risk premia. Our main result suggests that wind generators are willing to pay an insurance premium to conventional generators to reduce their risks. We conduct a thorough sensitivity analysis to test the influence of model parameters and find that our results on risk premia hold for a broad range of reasonable inputs.     

Dynamic model for market-based capacity investment decision considering stochastic characteristic of wind power

This paper proposes a decentralized market-based model for long-term capacity investment decisions in a liberalized electricity market with significant wind power generation. In such an environment, investment and construction decisions are based on price signal feedbacks and imperfect foresight of future conditions in electricity market. System dynamics concepts are used to model structural characteristics of power market such as, long-term firms’ behavior and relationships between variables, feedbacks and time delays. For conventional generation units, short-term price feedback for generation dispatching of forward market is implemented as well as long-term price expectation for profitability assessment in capacity investment. For wind power generation, a special framework is proposed in which generation firms are committed depending on the statistical nature of wind power. The method is based on the time series stochastic simulation process for prediction of wind speed using historical and probabilistic data. The auto-correlation nature of wind speed and the correlation with demand fluctuations are modeled appropriately. The Monte Carlo simulation technique is employed to assess the effect of demand growth rate and wind power uncertainties. Such a decision model enables the companies to find out the possible consequences of their different investment decisions. Different regulatory policies and market conditions can also be assessed by ISOs and regulators to check the performance of market rules. A case study is presented exhibiting the effectiveness of the proposed model for capacity expansion of electricity markets in which the market prices and the generation capacities are fluctuating due to uncertainty of wind power generation.     

Short-term optimal wind power generation capacity in liberalized electricity markets

Mainly because of environmental concerns and fuel price uncertainties, considerable amounts of wind-based generation capacity are being added to some deregulated power systems. The rapid wind development registered in some countries has essentially been driven by strong subsidizing programs. Since wind investments are commonly isolated from market signals, installed wind capacity can be higher than optimal, leading to distortions of the power prices with a consequent loss of social welfare. In this work, the influence of wind generation on power prices in the framework of a liberalized electricity market has been assessed by means of stochastic simulation techniques. The developed methodology allows investigating the maximal wind capacity that would be profitably deployed if wind investments were subject to market conditions only. For this purpose, stochastic variables determining power prices are accurately modeled. A test system resembling the size and characteristics of the German power system has been selected for this study. The expected value of the optimal, short-term wind capacity is evaluated for a considerable number of random realizations of power prices. The impact of dispersing the wind capacity over statistical independent wind sites has also been evaluated. The simulation results reveal that fuel prices, installation and financing costs of wind investments are very influential parameters on the maximal wind capacity that might be accommodated in a market-based manner.     

High penetration wind generation impacts on spot prices in the Australian national electricity market

This paper explores wind power integration issues for the South Australian (SA) region of the Australian National Electricity Market (NEM) by assessing the interaction of regional wind generation, electricity demand and spot prices over 2 recent years of market operation. SA's wind energy penetration has recently surpassed 20% and it has only a limited interconnection with other regions of the NEM. As such, it represents an interesting example of high wind penetration in a gross wholesale pool market electricity industry. Our findings suggest that while electricity demand continues to have the greatest influence on spot prices in SA, wind generation levels have become a significant secondary influence, and there is an inverse relationship between wind generation and price. No clear relationship between wind generation and demand has been identified although some periods of extremely high demand may coincide with lower wind generation. Periods of high wind output are associated with generally lower market prices, and also appear to contribute to extreme negative price events. The results highlight the importance of electricity market and renewable policy design in facilitating economically efficient high wind penetrations.     

Current status of research on optimum sizing of stand-alone hybrid solar–wind power generation systems

Solar and wind energy systems are omnipresent, freely available, environmental friendly, and they are considered as promising power generating sources due to their availability and topological advantages for local power generations. Hybrid solar–wind energy systems, uses two renewable energy sources, allow improving the system efficiency and power reliability and reduce the energy storage requirements for stand-alone applications. The hybrid solar–wind systems are becoming popular in remote area power generation applications due to advancements in renewable energy technologies and substantial rise in prices of petroleum products. This paper is to review the current state of the simulation, optimization and control technologies for the stand-alone hybrid solar–wind energy systems with battery storage. It is found that continued research and development effort in this area is still needed for improving the systems’ performance, establishing techniques for accurately predicting their output and reliably integrating them with other renewable or conventional power generation sources.     

How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?

In the short run, it is well known that increasing wind penetration is likely to reduce spot market electricity prices due to the merit order effect. The long run effect is less clear because there will be a change in new capacity investment in response to the wind penetration. In this paper we examine the interaction between capacity investment, wind penetration and market power by first using a least-cost generation expansion model to simulate capacity investment with increasing amounts of wind generation, and then using a computer agent-based model to predict electricity prices in the presence of market power. We find the degree to which firms are able to exercise market power depends critically on the ratio of capacity to peak demand. For our preferred long run generation scenario we show market power increases for some periods as wind penetration increases however the merit order counteracts this with the results that prices overall remain flat. Returns to peakers increase significantly as wind penetration increases. The market power in turn leads to inefficient dispatch which is exacerbated with large amounts of wind generation.     

Potential of trading wind power as regulation services in the California short-term electricity market

A short-term electricity market is usually composed of the energy market and ancillary service market. However, wind power is not allowed to be traded in ancillary service markets although it has been proven technically feasible to be regulation services. This paper aims to explore the market potential of trading wind power as regulation services in the California electricity market. A model for wind power trade in the day-ahead (DA) market is established considering the uncertainties of market prices and wind power. An optimal trading strategy for wind power producers is derived by using an analytical algorithm. Trading wind power as regulation is tested by using actual data and the impacts of market control on the market outcome are discussed. The results show that, based on the current framework of the California electricity market, wind power producers can earn much more money if they bid in the DA energy and regulation markets than if they only bid in the DA energy market. The results also show that the potential to enhance profit for wind power producers is larger in the regulation down market than in the regulation up market.     

The large-scale integration of wind generation: Impacts on price,reliability and dispatchable conventional suppliers

This work examines the effects of large-scale integration of wind powered electricity generation in a deregulated energy-only market on loads (in terms of electricity prices and supply reliability) and dispatchable conventional power suppliers. Hourly models of wind generation time series, load and resultant residual demand are created. From these a non-chronological residual demand duration curve is developed that is combined with a probabilistic model of dispatchable conventional generator availability, a model of an energy-only market with a price cap, and a model of generator costs and dispatch behavior. A number of simulations are performed to evaluate the effect on electricity prices, overall reliability of supply, the ability of a dominant supplier acting strategically to profitably withhold supplies, and the fixed cost recovery of dispatchable conventional power suppliers at different levels of wind generation penetration. Medium and long term responses of the market and/or regulator in the long term are discussed.     

Liberalization of the indian power industry: Wind power in Gujarat

Since liberalization of the Indian power sector in 1991, private participation in wind power production has been encouraged in Gujarat through a range of capital investment subsidies. Despite encouraging a significant level of investment within wind power, the technologies have not become more cost-effective. However capabilities within the activities of manufacturing, operating, maintaining and planning of windfarms are now relatively well established. The introduction of incentive mechanisms that explicitly encourage generation output are likely to encourage the costs of wind power to become more competitive with conventional power.     

Optimized Integration of Renewable Energy Technologies Into Jordan's Power Plant Portfolio

Jordan has experienced a significant increase of peak load and annual electricity demand within the last years due to economic development and population growth. The experienced growth rates are expected to continue during the next decades, making large investments in new power plant capacity necessary. Additionally, when gas supply from Egypt was interrupted several times and crude oil world market prices increased simultaneously, recent years have shown painfully that a power supply exclusively based on fossil fuel imports is subject to a very high risk and can have a strong negative impact on the national budget. Electricity-sector authorities are therefore looking for suitable solutions to keep up with the increasing electricity demand, to make Jordan more independent from fossil fuel imports, and to provide electricity at reasonable prices in the future. This paper presents a methodology for the optimized integration of renewable energy (RE) technologies into Jordan's existing power plant portfolio. The core of the methodology is the mixed integer linear optimization program REMix-CEM, developed at the German Aerospace Center (DLR), which optimizes capacity expansion and unit commitment of RE and conventional power generation technologies simultaneously. After describing Jordan's electricity sector and the available RE resources, the developed methodology and the results are presented. The paper shows that by the year 2022, Jordan could generate at least 47% of its electricity demand by a well-balanced mix of concentrating solar power, utility-scale photovoltaics, and onshore wind power. This scenario would maintain the security of electricity supply, absorb present growth rates of power generation costs, and make Jordan significantly more independent of fossil fuel imports.     

Investment risks in power generation: A comparison of fossil fuel and renewable energy dominated markets

Due to their high capital intensity, weather dependent renewable energies (RES) such as solar and wind face considerable investment risks in power markets. In addition, their uncertain production volumes also affect the investment risks of other plant types through the impact on power prices and residual demand. Increasing RES shares thus potentially increase overall investment risks in power markets, which many analysts consider to be a potential problem. Against this background, this paper compares investment risks of different technologies in markets with increasing shares of variable RES. It further analyses how generation mixes are affected by these investment risks if the risks are evaluated on a stand-alone basis or in a plant portfolio context of a private firm. For this purpose, a stylized investment and dispatch model is used to conduct Monte Carlo simulations from which risk measures are derived. The results show that capital intensive RES face the highest stand-alone risks, since their profits are most affected by the power price risk. However, the results further indicate that the stand-alone risks of variable RES decrease with their share in the market because of a negative correlation of output and price risk. In addition, RES have a risk benefit in firm plant portfolios in terms of constituting a hedge against losses of fossil fuel plants. This positive portfolio effect, however, rapidly decreases and becomes negative with increasing RES shares in the market.     

Applying portfolio theory to the electricity sector: Energy versus power

Portfolio theory has found its way in numerous applications for optimizing the electricity generation mix of a particular region. Existing models, however, consider typically a single time period and correspondingly do not properly account for actual dispatch constraints and energy sources with a non-dispatchable, variable output. This paper presents a portfolio theory model that explicitly distinguishes between installed capacity (power), electricity generation (energy) and actual instantaneous power delivery. This way, the variability of wind power and ramp limits of conventional power plants are correctly included in the investment optimization. The model is written as a quadratically constrained programming problem and illustrated in a case study. The results show that the introduction of wind power can be motivated to lower the risk on generation cost, albeit to smaller levels than typically reported in the literature. This wind power deployment further requires the need for sufficiently rampable technologies, to deal with its fluctuating output.     

A current and future state of art development of hybrid energy system using wind and PV-solar: A review

The wind and solar energy are omnipresent, freely available, and environmental friendly. The wind energy systems may not be technically viable at all sites because of low wind speeds and being more unpredictable than solar energy. The combined utilization of these renewable energy sources are therefore becoming increasingly attractive and are being widely used as alternative of oil-produced energy. Economic aspects of these renewable energy technologies are sufficiently promising to include them for rising power generation capability in developing countries. A renewable hybrid energy system consists of two or more energy sources, a power conditioning equipment, a controller and an optional energy storage system. These hybrid energy systems are becoming popular in remote area power generation applications due to advancements in renewable energy technologies and substantial rise in prices of petroleum products. Research and development efforts in solar, wind, and other renewable energy technologies are required to continue for, improving their performance, establishing techniques for accurately predicting their output and reliably integrating them with other conventional generating sources. The aim of this paper is to review the current state of the design, operation and control requirement of the stand-alone PV solar–wind hybrid energy systems with conventional backup source i.e. diesel or grid. This Paper also highlights the future developments, which have the potential to increase the economic attractiveness of such systems and their acceptance by the user.     

Market power in the European electricity market—The impacts of dry weather and additional transmission capacity

This paper uses a static computational game theoretic model of a fully opened European electricity market and can take strategic interaction among electricity-producing firms into account. The model is run for a number of scenarios: first, in the baseline under perfect competition, the prices differ due to the presence of various generation technologies and a limited ability to exchange electricity among countries. In addition, when large firms exercise market power, the model runs indicate that prices are the highest in countries where the number of firms is low. Second, dry weather would increase the prices in the hydro-rich Nordic countries followed by the Alpine countries. The price response would be about 20% higher with market power. Third, more transmission capacity would lower the prices in countries with high prices and it also reduces the impact of market power. Hence, more transmission capacity can improve market competitiveness.     

Well-functioning balancing markets: A prerequisite for wind power integration

This article focuses on the design of balancing markets in Europe taking into account an increasing wind power penetration. In several European countries, wind generation is so far not burdened with full balancing responsibility. However, the more wind power penetration, the less bearable for the system not to allocate balancing costs to the responsible parties. Given the variability and limited predictability of wind generation, full balancing exposure is however only feasible conditionally to well-functioning balancing markets. On that account, recommendations ensuring an optimal balancing market design are formulated and their impact on wind generation is assessed. Taking market-based or cost-reflective imbalance prices as the main objective, it is advised that: (1) the imbalance settlement should not contain penalties or power exchange prices, (2) capacity payments should be allocated to imbalanced BRPs via an additive component in the imbalance price and (3) a cap should be imposed on the amount of reserves. Efficient implementation of the proposed market design may require balancing markets being integrated across borders.     

A review on reliability assessment for wind power

The application of wind energy in electric power systems is growing rapidly due to enhanced public concerns to adverse environmental impacts and escalation in energy costs associated with the use of conventional energy sources. Electric power from wind energy is quite different from that of conventional resources. The fundamental difference is that the wind power is intermittent and uncertain. Therefore, it affects the reliability of power system in a different manner from that of the conventional generators. This paper, from available literatures, presents the model of wind farms and the methods of wind speed parameters assessment. Two main categories of methods for evaluating the wind power reliability contribution, i.e., the analytical method and the Monte Carlo simulation method have been reviewed. This paper also summarizes factors affecting the reliability of wind power system, such as wake effect, correlation of output power for different windturbines, effect of windturbine parameters, penetration and environment. An example has been used to illustrate how these factors affect the reliability of wind power system. Finally, mainstream reliability indices for evaluating reliability are introduced. Among these reliability indices, some are recently developed, such as wind generation interrupted energy benefit (WGIEB), wind generation interruption cost benefit (WGICB), Equivalent Capacity Rate (ECR), load carrying capacity benefit ratio (LCCBR).     

Impact of wind power in autonomous power systems—power fluctuations—modelling and control issues

This paper describes a detailed modelling approach to study the impact of wind power fluctuations on the frequency control in a non‐interconnected system with large‐scale wind power. The approach includes models for wind speed fluctuations, wind farm technologies, conventional generation technologies, power system protection and load. Analytical models for wind farms with three different wind turbine technologies, namely Doubly Fed Induction Generator, Permanent Magnet Synchronous Generator and Active Stall Induction Generator‐based wind turbines, are included. Likewise, analytical models for diesel and steam generation plants are applied. The power grid, including speed governors, automatic voltage regulators, protection system and loads is modelled in the same platform. Results for different load and wind profile cases are being presented for the case study of the island Rhodes, in Greece. The scenarios studied correspond to reference year of study 2012. The effect of wind fluctuations in the system frequency is studied for the different load cases, and comments on the penetration limits are being made based on the results. Copyright © 2010 John Wiley & Sons, Ltd.     

Winds of change: How high wind penetrations will affect investment incentives in the GB electricity sector

Wind power is widely expected to expand rapidly in Britain over the next decade. Large amounts of variable wind power on the system will increase market risks, with prices more volatile and load factors for conventional thermal plant lower and more uncertain. This extra market risk may discourage investment in generation capacity. Financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind. Increased price risk will also make investment in other forms of low-carbon generation (e.g. nuclear power) more challenging.