What Happens When it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Variability in the Nordic Electricity Market
AbstractHigh levels of wind power penetration will tend to affect prices in a deregulated electricity market. Much of the analysis in the literature has focused on the effect that wind power has on average electricity prices, this paper attempts to test the effect that wind power production has on the variability of wholesale electricity prices in the spot market. I use a simple distributed lag econometric model and five years worth of hourly and daily data from Denmark, which is one of the few places with a long history of significant wind power penetration. I show that wind power has the effect of reducing intra-day variability but that this result only partially carries over to price variation over weekly time windows. I suggest that the reduction in price variability in turn is due to a steeper supply schedule at peak-load times.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 889.
Length: 24 pages
Date of creation: 24 Nov 2011
Date of revision:
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Wind Power; Nordic Electricity Market; Empirical; Time Series;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Amundsen, Eirik S. & Bergman, Lars, 2006. "Why has the Nordic electricity market worked so well?," Utilities Policy, Elsevier, vol. 14(3), pages 148-157, September.
- Hjalmarsson, Erik, 2000. "Nord Pool: A Power Market Without Market Power," Working Papers in Economics 28, University of Gothenburg, Department of Economics.
- Mauritzen, Johannes, 2012. "Dead Battery? Wind Power, the Spot Market, and Hydro Power Interaction in the Nordic Electricity Market," Working Paper Series 908, Research Institute of Industrial Economics.
- Mauritzen, Johannes, 2011. "Dead Battery? Wind Power, The Spot Market, and Hydro Power Interaction in the Nordic Electricity Market," Discussion Papers 2011/16, Department of Business and Management Science, Norwegian School of Economics.
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