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Estimating the impact of wind generation and wind forecast errors on energy prices and costs in Ireland

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  • Swinand, Gregory P
  • O'Mahoney, Amy

Abstract

This paper studies the impact of wind generation on system costs and prices in Ireland. The need to mitigate climate change, achieve renewables energy targets, and use renewable sources of energy means that many countries are considering greater levels of wind generation in their power generation mix. The overall impact of wind generation on system costs and performance has only been studied recently, and often with limited actual data from power systems with increased wind penetration. The paper uses a unique dataset of half-hourly system demand, generation, wind forecast generation, and actual wind generation, along with Irish system marginal price (SMP) data from 2008 to autumn 2012. An econometric time-series model of SMP as a function of forecast and realized demand and wind generation is formed. The costs of balancing and system constraints are included in the cost of ‘uplift’, and thus the total cost of a variety of factors is included in our estimates for Ireland. Our results suggest that each 1% increase in wind generation reduces SMP in Ireland by about 0.06%, while each 1% wind forecast error increases SMP about 0.02%. In absolute terms, though, at the mean the impact of wind forecast errors is small, or about 0.4€cent/MWh-wind generated. However, the impact per MWh forecast error is about €1.

Suggested Citation

  • Swinand, Gregory P & O'Mahoney, Amy, 2014. "Estimating the impact of wind generation and wind forecast errors on energy prices and costs in Ireland," MPRA Paper 56246, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:56246
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    1. Olukunle O. Owolabi & Toryn L. J. Schafer & Georgia E. Smits & Sanhita Sengupta & Sean E. Ryan & Lan Wang & David S. Matteson & Mila Getmansky Sherman & Deborah A. Sunter, 2021. "Role of Variable Renewable Energy Penetration on Electricity Price and its Volatility Across Independent System Operators in the United States," Papers 2112.11338, arXiv.org, revised Nov 2022.
    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.
    3. Goodarzi, Shadi & Perera, H. Niles & Bunn, Derek, 2019. "The impact of renewable energy forecast errors on imbalance volumes and electricity spot prices," Energy Policy, Elsevier, vol. 134(C).
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    5. Di Cosmo, Valeria & Malaguzzi Valeri, Laura, 2018. "Wind, storage, interconnection and the cost of electricity generation," Energy Economics, Elsevier, vol. 69(C), pages 1-18.
    6. González-Aparicio, I. & Zucker, A., 2015. "Impact of wind power uncertainty forecasting on the market integration of wind energy in Spain," Applied Energy, Elsevier, vol. 159(C), pages 334-349.
    7. Lisa MH Hall & Alastair Buckley & Jose Mawyin, 2015. "Estimating the Impact of Wind Generation in the UK," Papers 1510.05854, arXiv.org, revised Nov 2015.
    8. Waterson, Michael & Trujillo- Baute, Elisa & Giulietti, Monica, 2022. "Intermittency and the social role of storage," Energy Policy, Elsevier, vol. 165(C).
    9. Ahmed, Adil & Khalid, Muhammad, 2019. "A review on the selected applications of forecasting models in renewable power systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 100(C), pages 9-21.
    10. Slednev, Viktor & Bertsch, Valentin & Ruppert, Manuel & Fichtner, Wolf, 2017. "Highly resolved optimal renewable allocation planning in power systems under consideration of dynamic grid topology," MPRA Paper 79706, University Library of Munich, Germany.
    11. Yang, Hongming & Qiu, Jing & Meng, Ke & Zhao, Jun Hua & Dong, Zhao Yang & Lai, Mingyong, 2016. "Insurance strategy for mitigating power system operational risk introduced by wind power forecasting uncertainty," Renewable Energy, Elsevier, vol. 89(C), pages 606-615.
    12. Bajo-Buenestado, Raúl, 2021. "Operating reserve demand curve, scarcity pricing and intermittent generation: Lessons from the Texas ERCOT experience," Energy Policy, Elsevier, vol. 149(C).
    13. Ting Yang & Yajian Zhang & Zhaoxia Wang & Haibo Pen, 2018. "Secondary Frequency Stochastic Optimal Control in Independent Microgrids with Virtual Synchronous Generator-Controlled Energy Storage Systems," Energies, MDPI, vol. 11(9), pages 1-14, September.
    14. Kästel, Peter & Gilroy-Scott, Bryce, 2015. "Economics of pooling small local electricity prosumers—LCOE & self-consumption," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 718-729.
    15. Valeria Di Cosmo & Laura Malaguzzi Valeri, 2016. "Wind, storage, interconnection and the cost of electricity," Working Papers 2016/30, Institut d'Economia de Barcelona (IEB).

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    More about this item

    Keywords

    Cost function; econometrics; power generation economics; power system economics; wind power generation;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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