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Blowing in the Wind: Vanishing Payoffs of a Tolling Agreement for Natural-gas-fired Generation of Electricity in Texas

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  • Chi-Keung Woo, Ira Horowitz, Brian Horii, Ren Orans, and Jay Zarnikau

Abstract

We use a large Texas database to quantify the effect of rising wind generation on the payoffs of a tolling agreement for natural-gas-fired generation of electricity. We find that while a 20% increase in wind generation may not have a statistically-significant effect, a 40% increase can reduce the agreement's average payoff by 8% to 13%. Since natural-gas-fired generation is necessary for integrating large amounts of intermittent wind energy into an electric grid, our finding contributes to the policy debate of capacity adequacy and system reliability in a restructured electricity market that will see large-scale wind-generation development.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 33 (2012)
Issue (Month): Number 1 ()
Pages:

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Handle: RePEc:aen:journl:33-1-a08

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Cited by:
  1. J. Zarnikau & C. Woo & R. Baldick, 2014. "Did the introduction of a nodal market structure impact wholesale electricity prices in the Texas (ERCOT) market?," Journal of Regulatory Economics, Springer, vol. 45(2), pages 194-208, April.

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