Gone with the Wind?: Electricity Market Prices and Incentives to Invest in Thermal Power Plants under Increasing Wind Energy Supply
AbstractThe increased wind energy supplied to many electricity markets around the world has to be balanced by reliable back up units or other complementary measures when wind conditions are low. At the same time wind energy impacts both, the utilization of thermal power plants and the market prices. While the market prices tend to decrease, the impact on the utilization of different plant types is at the outset unclear. To analyze the incentives to invest in thermal power plants under increased wind energy supply, we develop a computational model which includes start-up restrictions and costs and apply it to the German case. We find that due to current wind supply the market prices are reduced by more than five percent, and the incentives to invest in natural gas fired units are largely decreased. An increased wind supply erodes their attractiveness further. Consequently, a gap between the need for and the incentive to provide exibility can – be "expected".
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 852.
Length: 16 p.
Date of creation: 2009
Date of revision:
Publication status: Published in: Energy Economics 33 (2011), Iss. 2, 249-256
Electricity market modeling; start-up costs; wind energy; oligopoly; Germany;
Other versions of this item:
- Traber, Thure & Kemfert, Claudia, 2011. "Gone with the wind? -- Electricity market prices and incentives to invest in thermal power plants under increasing wind energy supply," Energy Economics, Elsevier, vol. 33(2), pages 249-256, March.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
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