The effects of wind generation capacity on electricity prices and generation costs: a Monte Carlo analysis

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Muireann Á Lynch, John CurtisAbstract: We use Monte Carlo analysis to examine the potential of increased renewable generation to provide a hedge against variability in energy prices and costs. Fuel costs, electricity demand and wind generation are allowed to vary and a unit commitment and economic dispatch algorithm is employed to produce costminimising generation schedules under different levels of installed wind capacity. Increased wind capacity reduces the mean and the variance of production costs but only the variance of electricity prices. Wind generators see their market revenues increase while consumer payments and fossil generator profits do not considerably vary as wind capacity increases. Risk aversion is captured by considering the Conditional Value-at-Risk for both consumers and producers. The optimal level of wind generation increases as risk aversion increases due to the potential of wind to act as a hedge against very high electricity prices in high fuel price scenarios.

All-island coordination of energy infrastructure and renewable energy supports

“…This may occur in the future, and consistently high wholesale prices increases the possibility of a rebate for consumers. Indeed, this aligns with previous literature, which suggests that renewable energy is particularly useful at times of very high fuel prices (Lynch and Curtis, 2016).…”

“…In terms of the ex ante literature, several market studies have been performed in Ireland examining the potential for RES-E generation to reduce electricity prices. Applications in Ireland include Tuohy et al (2009), which used the WILMAR modelling tool, Clancy et al (2015), which uses the PLEXOS modelling tool, and Lynch and Curtis (2016), which uses the FAST modelling tool. These studies find that wind generation decreases costs and emissions for the Irish power system under various assumptions around the future electricity system.…”

The impact of the North Atlantic Oscillation on electricity markets: A case study on Ireland

“…The greater wind resource under NAO + phases is also associated with a lower variance in costs and prices. Previous work shows how increased wind capacity reduces the mean and the variance of annual production costs (Lynch and Curtis, 2016). The statistics measuring skewness indicate that the distributions of both costs and prices are marginally less right-skewed during NAO + phases or when wind capacity increases, i.e.…”