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Wind power intermittency and the balancing power market: Evidence from Denmark

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  • Soini, Vesa

Abstract

Generated amounts of wind power fluctuate considerably over time due to weather patterns. Yet majority of wind power is sold in the day-ahead market, where producers are required to commit to a physical delivery 12–36h in advance. If the wind suddenly dies down, producers can cover their deficit either by purchasing from the intraday market or, as a last resort, from the balancing power market. This paper studies the pricing in the balancing power market during times of lower-than-expected wind power generation. Using data to construct ”wind power surplus”, defined as the difference between wind power prognosis and actual wind power production, this paper uses nonlinear regression methods to estimate the effect of wind surplus on the price of balancing power. The main finding is that the balancing power prices are consistently higher during times of lower-than-expected wind power production even after controlling for other factors. If we fix other covariates at their means and compute the predicted balancing power prices at the 5th and 95th percentile of wind power surplus, the difference is 26.8 DKK/MWH. For down-regulation, the corresponding figure is 21.9 DKK/MWH.

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  • Soini, Vesa, 2021. "Wind power intermittency and the balancing power market: Evidence from Denmark," Energy Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002838
    DOI: 10.1016/j.eneco.2021.105381
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    References listed on IDEAS

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    1. MURĂRAȘU Ioan Cătălin, 2023. "Analysis of the Volatility of Renewable Sources of Electricity in Romania and the Assessment of Their Capacity to Replace the Conventional Sources," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.

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    More about this item

    Keywords

    Wind power; Intermittency; Energy auctions;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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