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The Impact of the North Atlantic Oscillation on Electricity Markets: A case study on Ireland

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  • Curtis, John
  • Lynch, Muireann Á.
  • Zubiate, Laura

Abstract

The North Atlantic Oscillation (NAO) is a large-scale atmospheric circulation pattern driving climate variability in north-western Europe. As the deployment of wind-powered generation expands on electricity networks across Europe, the impacts of the NAO on the electricity system will be amplified. This study assesses the impact of the NAO, via wind-power generation, on the electricity market considering thermal generation costs, wholesale electricity prices and wind generation subsidies. A Monte Carlo approach is used to model NAO phases and generate hourly wind speed time-series data, electricity demand and fuel input data. A least-cost unit commitment and economic dispatch model is used to simulate an island electricity system, modelled on the all-island Irish electricity system. The impact of the NAO obviously depends on the level of wind capacity within an electricity system. Our results indicate that on average a switch from negative to positive NAO phase can reduce thermal generation costs by up to 8%, reduce wholesale electricity prices by as much as €1.5/MWh, and increase wind power generators' revenue by 12%.
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  • Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "The Impact of the North Atlantic Oscillation on Electricity Markets: A case study on Ireland," Papers RB2016/3/5, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:rb2016/3/5
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    Cited by:

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    2. Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "The impact of the North Atlantic Oscillation on electricity markets: A case study on Ireland," Energy Economics, Elsevier, vol. 58(C), pages 186-198.
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    More about this item

    Keywords

    electricity/Ireland;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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