IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v115y2016ip2p1385-1399.html
   My bibliography  Save this article

It is windy in Denmark: Does market integration suffer?

Author

Listed:
  • Figueiredo, Nuno Carvalho
  • Silva, Patrícia Pereira da
  • Cerqueira, Pedro A.

Abstract

Some benefits of spot electricity markets integration include the optimization of renewable power, increasing transmission grid security and the decreasing need for internal generation reserves. The high penetration of wind power is known to have a clear influence on price convergence between electricity markets joined by market splitting. However, in multiple interconnected markets, cross-border flows can also play a role in the market splitting behaviour. Denmark, with a high penetration of wind power, is clearly the ideal case study. This paper aims to assess the influence of high penetration of wind power on the market splitting behaviour between West and East Denmark, taking into account cross-border electricity flows. This is modelled through logit and non-parametric models, estimating the probability of market splitting occurrence between both Danish bidding areas. Market splitting probability is found to be sensitive to wind power, nevertheless with distinct behaviour according to interconnection congestion configuration. The highest availability of wind power in West Denmark, which can reach a generation share of 1.5 times the demand, requires strong cross-border interconnections to allow the export of the excess generation. Policies governing a joint assessment of the requirements for additional interconnection and wind power expansion plans, should be developed.

Suggested Citation

  • Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da & Cerqueira, Pedro A., 2016. "It is windy in Denmark: Does market integration suffer?," Energy, Elsevier, vol. 115(P2), pages 1385-1399.
  • Handle: RePEc:eee:energy:v:115:y:2016:i:p2:p:1385-1399
    DOI: 10.1016/j.energy.2016.05.038
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S036054421630648X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Faddy Ardian & Silvia Concettini & Anna Creti, 2015. "Intermittent renewable generation and network congestion: an empirical analysis of Italian Power Market," Working Papers hal-01218543, HAL.
    2. Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2010. "Long-run relations in european electricity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 805-832.
    3. Moreno, Blanca & López, Ana J. & García-Álvarez, María Teresa, 2012. "The electricity prices in the European Union. The role of renewable energies and regulatory electric market reforms," Energy, Elsevier, vol. 48(1), pages 307-313.
    4. Lynch, Muireann Á. & Tol, Richard S.J. & O'Malley, Mark J., 2012. "Optimal interconnection and renewable targets for north-west Europe," Energy Policy, Elsevier, vol. 51(C), pages 605-617.
    5. Batlle, C. & Pérez-Arriaga, I.J. & Zambrano-Barragán, P., 2012. "Regulatory design for RES-E support mechanisms: Learning curves, market structure, and burden-sharing," Energy Policy, Elsevier, vol. 41(C), pages 212-220.
    6. Haldrup, Niels & Nielsen, Morten Orregaard, 2006. "A regime switching long memory model for electricity prices," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 349-376.
    7. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521355643, April.
    8. Klessmann, Corinna & Nabe, Christian & Burges, Karsten, 2008. "Pros and cons of exposing renewables to electricity market risks--A comparison of the market integration approaches in Germany, Spain, and the UK," Energy Policy, Elsevier, vol. 36(10), pages 3646-3661, October.
    9. Cutler, Nicholas J. & Boerema, Nicholas D. & MacGill, Iain F. & Outhred, Hugh R., 2011. "High penetration wind generation impacts on spot prices in the Australian national electricity market," Energy Policy, Elsevier, vol. 39(10), pages 5939-5949, October.
    10. Lund, Henrik, 2010. "The implementation of renewable energy systems. Lessons learned from the Danish case," Energy, Elsevier, vol. 35(10), pages 4003-4009.
    11. Meeus, L. & Vandezande, L. & Cole, S. & Belmans, R., 2009. "Market coupling and the importance of price coordination between power exchanges," Energy, Elsevier, vol. 34(3), pages 228-234.
    12. Park, Haesun & Mjelde, James W. & Bessler, David A., 2006. "Price dynamics among U.S. electricity spot markets," Energy Economics, Elsevier, vol. 28(1), pages 81-101, January.
    13. Helen Higgs, 2009. "Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets," Discussion Papers in Economics economics:200904, Griffith University, Department of Accounting, Finance and Economics.
    14. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
    15. Nicolosi, Marco, 2010. "Wind power integration and power system flexibility-An empirical analysis of extreme events in Germany under the new negative price regime," Energy Policy, Elsevier, vol. 38(11), pages 7257-7268, November.
    16. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, January.
    17. Franco, Alessandro & Salza, Pasquale, 2011. "Strategies for optimal penetration of intermittent renewables in complex energy systems based on techno-operational objectives," Renewable Energy, Elsevier, vol. 36(2), pages 743-753.
    18. Sáenz de Miera, Gonzalo & del Ri­o González, Pablo & Vizcaino, Ignacio, 2008. "Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain," Energy Policy, Elsevier, vol. 36(9), pages 3345-3359, September.
    19. Lund, Henrik, 2007. "Renewable energy strategies for sustainable development," Energy, Elsevier, vol. 32(6), pages 912-919.
    20. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da & Cerqueira, Pedro A., 2015. "Evaluating the market splitting determinants: evidence from the Iberian spot electricity prices," Energy Policy, Elsevier, vol. 85(C), pages 218-234.
    21. Higgs, Helen, 2009. "Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets," Energy Economics, Elsevier, vol. 31(5), pages 748-756, September.
    22. Worthington, Andrew & Kay-Spratley, Adam & Higgs, Helen, 2005. "Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis," Energy Economics, Elsevier, vol. 27(2), pages 337-350, March.
    23. Lund, Henrik & Clark, Woodrow W., 2002. "Management of fluctuations in wind power and CHP comparing two possible Danish strategies," Energy, Elsevier, vol. 27(5), pages 471-483.
    24. Woo, C.K. & Zarnikau, J. & Moore, J. & Horowitz, I., 2011. "Wind generation and zonal-market price divergence: Evidence from Texas," Energy Policy, Elsevier, vol. 39(7), pages 3928-3938, July.
    25. David Benatia & Nick Johnstone & Ivan Haščič, 2013. "Effectiveness of Policies and Strategies to Increase the Capacity Utilisation of Intermittent Renewable Power Plants," OECD Environment Working Papers 57, OECD Publishing.
    26. Mauritzen, Johannes, 2010. "What happens when it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Volatility in the Nordic Electricity Market," Discussion Papers 2010/18, Norwegian School of Economics, Department of Business and Management Science.
    27. Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
    28. da Graça Carvalho, Maria & Bonifacio, Matteo & Dechamps, Pierre, 2011. "Building a low carbon society," Energy, Elsevier, vol. 36(4), pages 1842-1847.
    29. Gelabert, Liliana & Labandeira, Xavier & Linares, Pedro, 2011. "An ex-post analysis of the effect of renewables and cogeneration on Spanish electricity prices," Energy Economics, Elsevier, vol. 33(S1), pages 59-65.
    30. Hayfield, Tristen & Racine, Jeffrey S., 2008. "Nonparametric Econometrics: The np Package," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 27(i05).
    31. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.
    32. Amorim, Filipa & Pina, André & Gerbelová, Hana & Pereira da Silva, Patrícia & Vasconcelos, Jorge & Martins, Victor, 2014. "Electricity decarbonisation pathways for 2050 in Portugal: A TIMES (The Integrated MARKAL-EFOM System) based approach in closed versus open systems modelling," Energy, Elsevier, vol. 69(C), pages 104-112.
    33. Mulder, Machiel & Scholtens, Bert, 2013. "The impact of renewable energy on electricity prices in the Netherlands," Renewable Energy, Elsevier, vol. 57(C), pages 94-100.
    34. Munksgaard, Jesper & Morthorst, Poul Erik, 2008. "Wind power in the Danish liberalised power market--Policy measures, price impact and investor incentives," Energy Policy, Elsevier, vol. 36(10), pages 3940-3947, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:eneeco:v:66:y:2017:i:c:p:108-115 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:115:y:2016:i:p2:p:1385-1399. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.journals.elsevier.com/energy .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.