Impact of wind energy on electricity markets

J. Usaola(a), M.A. Moreno(a), G. Sáenz de Miera(b), J. Rivier(c), M. Bueno(a)

(a) Department of Electrical Engineering. Universidad Carlos III de Madrid

(b) Iberdrola (c) Iberdrola Renovables

EWEC 2009. February 18, 2009. Marseille

EWEC 2009. February 18, 2009. Marseille 2

Effects considered in the study

The effects to be considered are due to the intermittent nature of the resource. They are: Impact on balancing markets. Impact on electricity markets’ price. Impact on capacity prices.

Other effects on power system operation (response to voltage dips, contribution to ancillary services) have technological answers.

Subsidies are not considered as costs in the study. Impact on grid development not considered in this study.

EWEC 2009. February 18, 2009. Marseille 3

Spanish figures for wind power and demand.

0

2000

4000

6000

8000

10000

12000

14000

16000

Installed wind power

Total demand (2008) 263961 GWh

Hydro: 8%

Nuclear: 22 %

Coal: 17 %

Fuel/gas: 1 %

CCGT 33 %

Wind 11 %

Other d.g.: 13%

EWEC 2009. February 18, 2009. Marseille 4

Effect on balancing markets. Facts and definitions.

Types of reserves Primary reserves

(t < 30 sec)

Secondary reserves (30 sec ≤ t ≤ 15 min)

Tertiary reserves (15 min ≤ t ≤ hours)

Gradient smaller than 1620 MW/hour

Around 14000 MW installed – year 2007/8

Reserve margin in Spain: max ~ 1300 MW

EWEC 2009. February 18, 2009. Marseille 5

Effect on balancing markets.

Changes in wind energy in Spain: Up to 1620 MW/h in 2007-8 with ~14 GW of wind energy. Smaller than the morning rise ( ~ 4000 MW/h)

Both changes can join, which could put more stress on the system.

The main impact is on tertiary reserves. Secondary reserves are not much affected, because of the temporal

time schedule.

But the power is growing on…

EWEC 2009. February 18, 2009. Marseille 6

Balancing markets in Spain in the last years. Power.

Band price

0,00

0,10

0,20

0,30

0,40

0,50

0,60

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008B

P/M

P

Secondary power reserves Secondary power prices

Secondary reserve

700

750

800

850

900

950

1.000

2000 2001 2002 2003 2004 2005 2006 2007 2008

(GW

)

EWEC 2009. February 18, 2009. Marseille 7

Balancing markets in Spain in the last years. Energy.

Energy of reserve used Energy reserve prices

Energy used by the balancing mechanisms

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GW

h

2U 2D 3U 3 D IM U IM D

Reserve price

0,00

0,50

1,00

1,50

2,00

2,50

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Pri

ce

/MP

2U 2D 3U 3 D IM U IM D

EWEC 2009. February 18, 2009. Marseille 8

Effect on balancing market in Spain.

Negligible effects on secondary power reserve. Small or negligible effect on:

Reserve consumption (of any kind). Reserve prices (of any kind).

Penetration in terms of energy is about 10%. Greater penetration could lead to greater figures.

EWEC 2009. February 18, 2009. Marseille 9

Effects on prices an capacity costs. Equilibria.

Equilibrium without wind Situation with wind (transient)

peak

baseload

1

ACC (R/MWh)

D1

Load(MW)

Price (R/MWh)

VCB

VCP

DDL DP

PB

PP

1

With wind

No wind

peak

baseload

1

ACC (R/MWh)

D1

Load(MW)

Price (R/MWh)

VCB

VCP

DDP

PB

PP

1

EWEC 2009. February 18, 2009. Marseille 10

Effects on prices an capacity costs. Equilibria.

Situation in the new equilibrium: Same price levels than without

wind. Fuel costs have been reduced. Capacity of peakers has been

increased less than mean Pwind

Equilibrium with wind

Mean Pwind

peak

ACC (R/MWh)

baseload

1

D1

Load(MW)

Price (R/MWh)

VCB

VCP

DDP

PB

PPP’P

P’B With wind

No wind

1

Capacity credit = 0

EWEC 2009. February 18, 2009. Marseille 11

Spanish situation.

Price vs. Wind power small decreasing influence

“First approach” analysis

Average wind power 2950 MWWind power in peak: 1239 MW

Fuel/gas peakers 2007: 4810 MW

Capacity payment in Spain in 2007: 3.62 €/MWh

Average DM price 2007: 40 €/MWh

Year 2007

EWEC 2009. February 18, 2009. Marseille 12

Conclusion.

Important components of wind power effect on electricity markets: Impact on prices no impact in equilibrium, decrease in short term Impact on balancing markets increase of tertiary reserves Impact on capacity payment increase up to the mean wind power

Effects on Spanish system seem to have been small: No great changes in reserves market, no apparent relation with wind. Slight decrease in price difficult to prove.

Evidence with a 10% penetration seems to show that impact is smaller than forecasted.

However there are not two equal power systems

EWEC 2009. February 18, 2009. Marseille 13

Thank you for your attention