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Economic properties of wind power: A European assessment

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  • Boccard, Nicolas

Abstract

We investigate the concomitance of intermittent wind powered generation (WPG) with load to assess its system value as the cost of replacing its output, hour by hour, using more intensively thermal technologies. The difference with its actual cost defines a social cost of wind power which is further divided into a technological and an adequacy component. Whereas the former may become negligible once thermal technologies pay for carbon emissions, the latter is a lower bound on WPG structural weakness w.r.t. thermal technologies. We apply our procedure to Germany, Denmark, Spain, France, Portugal and Ireland using hourly load and WPG data over several years. Our empirical findings show that there is a grain of truth in both the pros and the cons of wind power. The system value of WPG varies from three quarters of the equivalent thermal cost of electricity (on a yearly basis) but the incompressible adequacy cost represents a premium over the cost of serving yearly load in a system ranging around one-fifth.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 7 (July)
Pages: 3232-3244

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Handle: RePEc:eee:enepol:v:38:y:2010:i:7:p:3232-3244

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Electricity Renewables Network externalities;

References

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  1. Oswald, James & Raine, Mike & Ashraf-Ball, Hezlin, 2008. "Will British weather provide reliable electricity?," Energy Policy, Elsevier, Elsevier, vol. 36(8), pages 3202-3215, August.
  2. Munksgaard, Jesper & Morthorst, Poul Erik, 2008. "Wind power in the Danish liberalised power market--Policy measures, price impact and investor incentives," Energy Policy, Elsevier, Elsevier, vol. 36(10), pages 3940-3947, October.
  3. Dinica, Valentina, 2008. "Initiating a sustained diffusion of wind power: The role of public-private partnerships in Spain," Energy Policy, Elsevier, Elsevier, vol. 36(9), pages 3562-3571, September.
  4. Boccard, Nicolas, 2009. "Capacity factor of wind power realized values vs. estimates," Energy Policy, Elsevier, Elsevier, vol. 37(7), pages 2679-2688, July.
  5. DeCarolis, Joseph F. & Keith, David W., 2006. "The economics of large-scale wind power in a carbon constrained world," Energy Policy, Elsevier, Elsevier, vol. 34(4), pages 395-410, March.
  6. Kennedy, Scott, 2005. "Wind power planning: assessing long-term costs and benefits," Energy Policy, Elsevier, Elsevier, vol. 33(13), pages 1661-1675, September.
  7. Finon, Dominique & Meunier, Guy & Pignon, Virginie, 2008. "The social efficiency of long-term capacity reserve mechanisms," Utilities Policy, Elsevier, Elsevier, vol. 16(3), pages 202-214, September.
  8. Sinden, Graham, 2007. "Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand," Energy Policy, Elsevier, Elsevier, vol. 35(1), pages 112-127, January.
  9. Bolinger, Mark & Wiser, Ryan, 2009. "Wind power price trends in the United States: Struggling to remain competitive in the face of strong growth," Energy Policy, Elsevier, Elsevier, vol. 37(3), pages 1061-1071, March.
  10. Martin, Brian & Diesendorf, Mark, 1983. "The economics of large-scale wind power in the UK A model of an optimally mixed CEGB electricity grid," Energy Policy, Elsevier, Elsevier, vol. 11(3), pages 259-266, September.
  11. Dale, Lewis & Milborrow, David & Slark, Richard & Strbac, Goran, 2004. "Total cost estimates for large-scale wind scenarios in UK," Energy Policy, Elsevier, Elsevier, vol. 32(17), pages 1949-1956, November.
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Citations

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Cited by:
  1. Hallack, Michelle & Vazquez, Miguel, 2013. "European Union regulation of gas transmission services: Challenges in the allocation of network resources through entry/exit schemes," Utilities Policy, Elsevier, Elsevier, vol. 25(C), pages 23-32.
  2. Vazquez, Miguel & Hallack, Michelle, 2013. "Need and design of short-term auctions in the EU gas markets," Energy Policy, Elsevier, Elsevier, vol. 63(C), pages 484-493.
  3. Lion Hirth, 2012. "The Market Value of Variable Renewables," Working Papers 2012.15, Fondazione Eni Enrico Mattei.
  4. Bazmi, Aqeel Ahmed & Zahedi, Gholamreza, 2011. "Sustainable energy systems: Role of optimization modeling techniques in power generation and supply—A review," Renewable and Sustainable Energy Reviews, Elsevier, Elsevier, vol. 15(8), pages 3480-3500.
  5. Rahimiyan, Morteza & Morales, Juan M. & Conejo, Antonio J., 2011. "Evaluating alternative offering strategies for wind producers in a pool," Applied Energy, Elsevier, vol. 88(12), pages 4918-4926.
  6. Stefan Ambec & Claude Crampes, 2010. "Electricity Production with Intermittent Sources of Energy," LERNA Working Papers, LERNA, University of Toulouse 10.07.313, LERNA, University of Toulouse.
  7. Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers, European University Institute 2013/36, European University Institute.
  8. Paulus, Moritz & Grave, Katharina & Lindenberger, Dietmar, 2011. "A methodology to estimate security of supply in electricity generation: results for Germany until 2030 given a high level of intermittent electricity feed-in," EWI Working Papers, Energiewirtschaftliches Institut an der Universitaet zu Koeln 2011-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  9. Delucchi, Mark A. & Jacobson, Mark Z., 2011. "Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies," Energy Policy, Elsevier, Elsevier, vol. 39(3), pages 1170-1190, March.

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