TY - JOUR

T1 - Gone with the wind? - Electricity market prices and incentives to invest in thermal power plants under increasing wind energy supply

AU - Traber, Thure

AU - Kemfert, Claudia

PY - 2011/3/1

Y1 - 2011/3/1

N2 - The increased wind energy supplied to many electricity markets around the world has to be balanced by reliably ramping units or other complementary measures when wind conditions are low. At the same time wind energy impacts both, the utilization of thermal power plants and the market prices. While the market prices tend to decrease, the impact on the utilization of different plant types is at the outset unclear. To analyze the incentives to invest in thermal power plants under increased wind energy supply, we develop a computational model which includes ramping restrictions and costs and apply it to the German case. We find that due to current wind supply the market prices are reduced by more than five percent, and the incentives to invest in natural gas fired units are largely reduced. An increased wind supply erodes their attractiveness further. Consequently, a gap between the need for and the incentive to provide flexibility can be expected.

AB - The increased wind energy supplied to many electricity markets around the world has to be balanced by reliably ramping units or other complementary measures when wind conditions are low. At the same time wind energy impacts both, the utilization of thermal power plants and the market prices. While the market prices tend to decrease, the impact on the utilization of different plant types is at the outset unclear. To analyze the incentives to invest in thermal power plants under increased wind energy supply, we develop a computational model which includes ramping restrictions and costs and apply it to the German case. We find that due to current wind supply the market prices are reduced by more than five percent, and the incentives to invest in natural gas fired units are largely reduced. An increased wind supply erodes their attractiveness further. Consequently, a gap between the need for and the incentive to provide flexibility can be expected.

KW - Economics

KW - Electricity market modeling

KW - Oligopoly

KW - Wind energy

KW - Start-up costs

UR - http://www.scopus.com/inward/record.url?scp=79151477121&partnerID=8YFLogxK

U2 - 10.1016/j.eneco.2010.07.002

DO - 10.1016/j.eneco.2010.07.002

M3 - Journal articles

AN - SCOPUS:79151477121

VL - 33

SP - 249

EP - 256

JO - Energy Economics

JF - Energy Economics

SN - 0140-9883

IS - 2

ER -