System integration costs of wind and hydropower generations in Turkey

In this paper we investigate the system integration costs for wind and river type hydropower generation in the Turkish electricity market, which mainly covers system imbalance costs, congestion management costs and ancillary services costs. The paper also shows that reflecting the imbalance costs to the renewable generators themselves reduced their generation forecast errors drastically. By using an Autoregressive Distributed Lag (ARDL) model, we find that wind and river type hydro generations cause significant imbalances in the Turkish electrical system. On average 1 MWh hydro and wind generation increases imbalance costs by 12.04 TL ($2.10) and 4.03 TL ($0.7), respectively. Most of the renewable imbalance effect stems from the congestion between the main consumption areas and the generation zones of river-type hydro. These costs are socialized and reflected to all consumers through transmission tariffs. It seems reasonable to reflect the congestions costs to the ones causing them which will create the necessary incentives to curb them. Defining new price zones that consider the persistent congestions in the system is recommended for this problem as it is a market-friendly and efficient solution.