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Renewable Electric Energy Integration: Quantifying the Value of Design of Markets for International Transmission Capacity

  • Karsten Neuhoff
  • Rodney Boyd
  • Thilo Grau
  • Julian Barquin
  • Francisco Echavarren
  • Janusz Bialek
  • Chris Dent
  • Christian von Hirschhausen
  • Benjamin Hobbs
  • Friedrich Kunz
  • Hannes Weigt
  • Christian Nabe
  • Georgios Papaefthymiou
  • Christoph Weber

Integrating large quantities of supply-driven renewable electricity generation remains a political and operational challenge. One of the main obstacles in Europe to installing at least 200 GWs of power from variable renewable sources is how to deal with the insufficient network capacity and the congestion that will result from new flow patterns. We model the current methodology for controlling congestion at international borders and compare its results, under varying penetrations of wind power, with a model that simulates an integrated European network that utilises nodal/localised marginal pricing. The nodal pricing simulations illustrate that congestion - and price - patterns vary considerably between wind scenarios and within countries, and that a nodal price regime could make fuller use of existing EU network capacity, introducing substantial operational cost savings and reducing marginal power prices in the majority of European countries.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1166.

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Length: 47 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwwpp:dp1166
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  1. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
  2. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June.
  3. Adriaan Weijde & Benjamin Hobbs, 2011. "Locational-based coupling of electricity markets: benefits from coordinating unit commitment and balancing markets," Journal of Regulatory Economics, Springer, vol. 39(3), pages 223-251, June.
  4. Ehrenmann, Andreas & Smeers, Yves, 2005. "Inefficiencies in European congestion management proposals," Utilities Policy, Elsevier, vol. 13(2), pages 135-152, June.
  5. O'Neill, Richard P. & Sotkiewicz, Paul M. & Hobbs, Benjamin F. & Rothkopf, Michael H. & Stewart, William R., 2005. "Efficient market-clearing prices in markets with nonconvexities," European Journal of Operational Research, Elsevier, vol. 164(1), pages 269-285, July.
  6. Giorgia Oggioni and Yves Smeers, 2012. "Degrees of Coordination in Market Coupling and Counter-Trading," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
  7. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
  8. Leuthold, Florian & Weigt, Hannes & von Hirschhausen, Christian, 2008. "Efficient pricing for European electricity networks - The theory of nodal pricing applied to feeding-in wind in Germany," Utilities Policy, Elsevier, vol. 16(4), pages 284-291, December.
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