What happens when it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Volatility in the Nordic Electricity Market
AbstractThis paper attempts to empirically test the effect that wind power production in Denmark has on volatility of the nordpool wholesale electricity prices. The main result is that wind power tends to significantly reduce intraday volatility but increases volatility over larger time windows. The negative elasticity for intraday volatility is likely due to a larger-in-magnitude price effect of wind power on peak hours then off-peak hours. I suggest that this in turn is due to a steeper supply schedule at peakloads. The positive elasticities in the wider time windows can be intuitively explained by the greater variability of the supply when large amounts of wind power are present. These finding have ramifications for investment in power generation, balancing as well as transmission capacity.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2010/18.
Length: 25 pages
Date of creation: 28 Dec 2010
Date of revision:
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Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Wind Power; Nordic Electricity Market;
Find related papers by JEL classification:
- Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
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- Olsen, Ole Jess & Amundsen, Eirik S. & Donslund, Bjarne, 2006. "How to play the game as the bridge between two European power markets--the case of Western Denmark," Energy Policy, Elsevier, vol. 34(17), pages 3293-3304, November.
- Rafal Weron & Adam Misiorek, 2005. "Modeling and forecasting electricity loads: A comparison," Econometrics 0502004, EconWPA.
- Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601.
- Hjalmarsson, Erik, 2000. "Nord Pool: A Power Market Without Market Power," Working Papers in Economics 28, University of Gothenburg, Department of 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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