Market Prices in a Power Market with More Than 50% Wind Power

Chapter
Part of the Studies in Systems, Decision and Control book series (SSDC, volume 144)

Abstract

Denmark has the highest proportion of wind power in the world. Wind power provided a world record of 39.1% of the total annual Danish electricity consumption in 2014 with as much as 51.7% in Western Denmark. Many would argue that the present power markets are not designed for such high shares of wind power production and that it would be hard to get good and stable prices. However, analyses in this chapter show that the Nordic power market works, extreme events have been few, and the current infrastructure and market organization has been able to handle the amount of wind power installed so far. It is found that geographical bidding areas for the wholesale electricity market reflect external transmission constraints caused by wind power. The analyses in this chapter use hourly data from West Denmark—which has the highest share of wind energy in Denmark and which is a separate price area at the Nordic power exchange. Data have been collected from the last ten years and periods with extreme wind conditions are used as case studies to illustrate the robustness of our findings.

References

  1. 1.
    Energistyrelsen, ENS 2012, Energiaftalen 22. marts 2012. https://ens.dk/. Accessed 26 Feb 2017
  2. 2.
    Borenstein, S.: The private and public economics of renewable electricity generation. J. Econ. Perspect. 26(1), 67–92 (2012)CrossRefGoogle Scholar
  3. 3.
    Hirth, L., Ueckerdt, F., Edenhofer, O.: Integration costs revisited - an economic framework for wind and solar variability. Renew. Energy 24, 925–939 (2015)CrossRefGoogle Scholar
  4. 4.
    Lamont, A.: Assessing the long-term system value of intermittent electric generation technologies. Energy Econ. 30(3), 1208–1231 (2008)CrossRefGoogle Scholar
  5. 5.
    Borenstein, S.: The market value and cost of solar photovoltaic electricity production. CSEM Working Paper 176, University of California Energy Institute, Berkeley, California (2008)Google Scholar
  6. 6.
    Joskow, P.: Comparing the costs of intermittent and dispatchable electricity generation technologies. Am. Econ. Rev.: Pap. Proc. 100(3), 238–241 (2011)CrossRefGoogle Scholar
  7. 7.
    Nicolosi, M.: The economics of renewable electricity market integration. An empirical and model-based analysis of regulatory frameworks and their impacts on the power market. Ph.D. dissertation, University of Cologne (2012)Google Scholar
  8. 8.
    Holttinen, H., Meibom, P., Orths, A., Lange, B., O’Malley, M., Tande, J.O., Estanqueiro, A., Gomez, E., Sder, L., Strbac, G., Charles Smith, J., van Hulle, F.: Impacts of large amounts of wind power on design and operation of power systems. Wind Energy 14(2), 179–192 (2011)CrossRefGoogle Scholar
  9. 9.
    Hirth, L.: The market value of variable renewables: the effect of solar wind power variability on their relative price. Energy Econ. 38, 218–236 (2013)Google Scholar
  10. 10.
    Smith, C., Milligan, M., DeMeo, E., Parsons, B.: Utility wind integration and operating impact state of the art. IEEE Trans. Power Syst. 22(3), 900–908 (2007)CrossRefGoogle Scholar
  11. 11.
    Brown, S., Rowlands, I.: Nodal pricing in Ontario, Canada: implications for solar PV electricity. Renew. Energy 34(1), 170–178 (2009)CrossRefGoogle Scholar
  12. 12.
    Lewis, G.: Estimating the value of wind energy using electricity locational marginal pricing. Energy Policy 38(7), 3221–3231 (2010)CrossRefGoogle Scholar
  13. 13.
    Hamidi, V., Li, F., Yao, L.: Value of wind power at different locations in the grid. IEEE Trans. Power Deliv. 26(2), 526–537 (2011)CrossRefGoogle Scholar
  14. 14.
    Ueckerdt, F., Hirth, L., Luderera, G., Edenhofera, O.: System LCOE: what are the costs of variable renewables? Energy 63, 61–75 (2013)CrossRefGoogle Scholar
  15. 15.
    International Energy Agency (IEA): The power of transformation: wind, sun and the economics of flexible power systems. OECD/IEA, Paris, France (2014)Google Scholar
  16. 16.
    Olsen, O.J., Skytte, K.: Competition and market power in Northern Europe. In: Glachant, J.-M., Finon, D. (eds.) Competition in European Electricity Markets, pp. 169–193. Edward Elgar Publishing Inc., Cheltenham (2003)Google Scholar
  17. 17.
    Skytte, K.: Fluctuating renewable energy on the power exchange. In: MacKerron, G., Pearson, P. (eds.) The International Energy Experience. Markets, Regulation and the Environment, pp. 219–231. Imperial College Press, London (2000)Google Scholar
  18. 18.
    Skytte, K., Ropenus, S.: Assessment and recommendations. Overcoming in short-term grid system regulatory and other barriers to distributed generation. Deliverable report D2, DG-GRID Project, Contract no. EIE/04/015/S07.38553 (2006)Google Scholar
  19. 19.
    Donkelaar, M., Maly, M., Skytte, K., Ropenus, S., Frias, P., Gomez, T.: Economic, policy and regulatory barriers and solutions for integrating more DER in electricity supply. Annual report, SOLID-DER Project, European Commission (2007)Google Scholar
  20. 20.
    Ropenus, S., Skytte, K.: Regulatory review and barriers for the electricity supply system for distributed generation in the EU-15. Int. J. Distrib. Energy Resour. 3(3), 243–257 (2007)Google Scholar
  21. 21.
    Jacobsen, H., Zvingilaite, E.: Reducing the market impact of large shares of intermittent energy in Denmark. Energy Policy 38(7), 3403–3413 (2010)CrossRefGoogle Scholar
  22. 22.
    Grohnheit, P.E., Andersen, F., Larsen, H.: Area price and demand response in a market with 25% wind power. Energy Policy 39(12), 8051–8061 (2011)CrossRefGoogle Scholar
  23. 23.
    Energinet.dk.  https://en.energinet.dk. Accessed 26 Feb 2017
  24. 24.
    Jensen, S.G., Skytte, K.: Interactions between the power and green certificate markets. Energy Policy 30(5), 425–435 (2002)CrossRefGoogle Scholar
  25. 25.
    Jensen, S.G., Skytte, K.: Simultaneous attainment of energy goals by means of green certificates and emission permits. Energy Policy 31(1), 63–71 (2003)CrossRefGoogle Scholar
  26. 26.
    Morthorst, P.E.: Green certificates and emission trading. Energy Policy 31(1), 1–2 (2003)CrossRefGoogle Scholar
  27. 27.
    Skytte, K.: Interplay between environmental regulation and power markets. EUI-RSCAS Working Papers, RSCAS no. 2006/04, European University Institute (EUI), Robert Schuman Centre for Advanced Studies (RSCAS) (2006)Google Scholar
  28. 28.
    Amundsen, E.S., Bergman, L.: Provision of operating reserve capacity: principles and practices on the Nordic electricity market. In: Competition and Regulation in Network Industries, vol. 2(1), pp. 73–98. Intersentia (2007)Google Scholar
  29. 29.
    Skytte, K.: The regulating power market on the Nordic power exchange Nord Pool: an econometric analysis. Energy Econ. 21, 295–308 (1999)CrossRefGoogle Scholar
  30. 30.
    Lund, P., Lindgren, J., Mikkola, J., Salpakari, J.: Review of energy system flexibility measures to enable high levels of variable renewable energy. Renew. Sustain. Energy Rev. 45, 785–807 (2015)CrossRefGoogle Scholar
  31. 31.
    International Energy Agency (IEA) and Nordic Energy Reserach (NORDEN): Nordic Energy Technology Perspectives. IEA/NORDEN, Oslo, Sweeden (2013)Google Scholar

Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.DTU Management EngineeringTechnical University of DenmarkKongens LyngbyDenmark

Personalised recommendations