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The effects of wind generation and other market determinants on price spikes

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  • Doering, Kenji
  • Sendelbach, Luke
  • Steinschneider, Scott
  • Lindsay Anderson, C.

Abstract

Electricity spot prices have shifted in response to increasing renewable energy infrastructure throughout the United States in recent decades. These shifts manifest as changes in the spot price mean and variance. One major factor influencing the variance of spot prices is the prevalence of price spikes. How renewables influence the magnitude and frequency of price spikes is not well understood. This study examines the influence of wind and additional determinants (load, nuclear generation, natural gas prices, as well as the load-to-capacity ratio) on electricity spot prices in the Electric Reliability Council of Texas system using a multiple regression mixture model framework. We focus on the influence of these determinants on the magnitude of spot prices within a low-price regime and a high-price regime, with the latter representative of price spikes. We also examine how system determinants influence the frequency of occurrence of each regime. We show that increases in wind generation drive average spot prices down in both the low and high price regime. However, system shortfalls of wind generation, particularly during times of high load, result in increased price magnitudes in both regimes, as well as more frequent price spike events.

Suggested Citation

  • Doering, Kenji & Sendelbach, Luke & Steinschneider, Scott & Lindsay Anderson, C., 2021. "The effects of wind generation and other market determinants on price spikes," Applied Energy, Elsevier, vol. 300(C).
    • Handle: RePEc:eee:appene:v:300:y:2021:i:c:s0306261921007285
    DOI: 10.1016/j.apenergy.2021.117316
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    2. Sheybanivaziri, Samaneh & Le Dréau, Jérôme & Kazmi, Hussain, 2024. "Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead," Discussion Papers 2024/1, Norwegian School of Economics, Department of Business and Management Science.
    3. Zhang, Yufan & Wen, Honglin & Feng, Tao & Chen, Yize, 2024. "Efficient demand response location targeting for price spike mitigation by exploiting price-demand relationship," Applied Energy, Elsevier, vol. 376(PA).
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    5. Nibedita, Barsha & Irfan, Mohd, 2022. "Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market," Renewable Energy, Elsevier, vol. 194(C), pages 538-551.
    6. Chai, Shanglei & Li, Qiang & Abedin, Mohammad Zoynul & Lucey, Brian M., 2024. "Forecasting electricity prices from the state-of-the-art modeling technology and the price determinant perspectives," Research in International Business and Finance, Elsevier, vol. 67(PA).

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