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Market Impacts of a Transmission Investment: Evidence from the ERCOT Competitive Renewable Energy Zones Project

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  • Heesun Jang

    (Department of Economics, Jeonbuk National University, Jeonju 54896, Korea)

Abstract

Texas has experienced a rapid development of wind power over the last 20 years. Since wind power was developed mostly in desolate areas that are remote from urban centers due to its nature conditions, Texas implemented the Competitive Renewable Energy Zones (CREZ) project, the goal of which is to integrate the wind supply regions with the large demand centers. The objectives of this paper are two-fold. The first is to investigate the impact of the CREZ project on market price convergence. Specifically, this paper analyzes the extent that the transmission project affected wholesale price level, variance, and difference between the regions. The second is to measure environmental benefits obtained from displacement of fossil fuel generators by wind power. The results provide a strong evidence for price convergence across the ERCOT market following the completion of the CREZ project. As well as price convergence, wholesale price level and variance are also reduced significantly. Specifically, the results show that the price difference between Houston and West which diverged up to around $100/MWh converges to zero after the project completed. The impacts are more significant during the high demand hours. The results also document significant reductions in emissions, as NOx emissions was reduced by around 4000 pounds in Texas as a whole. Effects on SO 2 and CO 2 are also calculated.

Suggested Citation

  • Heesun Jang, 2020. "Market Impacts of a Transmission Investment: Evidence from the ERCOT Competitive Renewable Energy Zones Project," Energies, MDPI, vol. 13(12), pages 1-16, June.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:12:p:3199-:d:373930
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    References listed on IDEAS

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    Cited by:

    1. Hongliang Tian & Liang Zhao & Sen Guo, 2023. "Comprehensive Benefit Evaluation of Power Grid Investment Considering Renewable Energy Development from the Perspective of Sustainability," Sustainability, MDPI, vol. 15(10), pages 1-17, May.
    2. Cheng Xin & Kailin Ji & Hao Chang & Yang Li & Ya-Qiong Liu, 2022. "Price Co-Movement between Electrical Equipment and Metal Commodities—A Time-Frequency Analysis," Sustainability, MDPI, vol. 14(20), pages 1-18, October.

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