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Estimating the value of additional wind and transmission capacity in the rocky mountain west

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  • Godby, Robert
  • Torell, Greg
  • Coupal, Roger

Abstract

The expansion of wind-generation in the United States poses significant challenges to policy-makers, particularly because wind’s intermittency and unpredictability can exacerbate problems of congestion on a transmission constrained grid. Understanding these issues is necessary if optimal development of wind energy and transmission is to occur. This paper applies a model that integrates the special concerns of electricity generation to empirically consider the challenges of developing wind resources in the Rocky Mountain region of the United States. Given the lack the high frequency data needed to address the special problems of intermittency and congestion, our solution is to create a dispatch model of the region and to use simulations to generate the necessary data, then use this data to understand the development patterns that have occurred as wind resources have been developed. Our results indicate that the price effects caused by changes in power output at intermittent sources are strongly dependent on supply conditions and the presence of market distortions caused by transmission constraints. Peculiarities inherent in electric grid operation can cause system responses that are not always intuitive. The distribution of the rents accruing to wind generation, particularly in unexpectedly windy periods are strongly dependent on the allocation of transmission rights when congestion occurs, which impacts potential returns to developing wind resources. Incidents of congestion depend on the pace of development of wind and transmission capacity. Not accounting for such distortions may cause new development to worsen market outcomes if mistaken estimates of benefits or costs lead to sub-optimal development of wind and transmission facilities.

Suggested Citation

  • Godby, Robert & Torell, Greg & Coupal, Roger, 2013. "Estimating the value of additional wind and transmission capacity in the rocky mountain west," MPRA Paper 44219, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:44219
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    References listed on IDEAS

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    1. 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.
    2. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
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    1. Lauren Knapp & Jacob Ladenburg, 2015. "How Spatial Relationships Influence Economic Preferences for Wind Power—A Review," Energies, MDPI, vol. 8(6), pages 1-25, June.
    2. Harrison Fell & Daniel T. Kaffine, 2014. "A one-two punch: Joint effects of natural gas abundance and renewables on coal-fired power plants," Working Papers 2014-10, Colorado School of Mines, Division of Economics and Business.
    3. Lynch & John Curtis, 2016. "The effects of wind generation capacity on electricity prices and generation costs: a Monte Carlo analysis," Applied Economics, Taylor & Francis Journals, vol. 48(2), pages 133-151, January.
    4. Fell, Harrison & Kaffine, Daniel T., 2014. "A one-two punch: Joint eects of natural gas abundance and renewables on coal-red power plants," CEnREP Working Papers 340063, North Carolina State University, Department of Agricultural and Resource Economics.
    5. Brown, Jason P. & Coupal, Roger & Hitaj, Claudia & Kelsey, Timothy W. & Krannich, Richard S. & Xiarchos, Irene M., "undated". "New Dynamics in Fossil Fuel and Renewable Energy for Rural America," USDA Miscellaneous 260676, United States Department of Agriculture.
    6. 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.
    7. Oliver, Matthew E., 2015. "Economies of scale and scope in expansion of the U.S. natural gas pipeline network," Energy Economics, Elsevier, vol. 52(PB), pages 265-276.

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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