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Economic properties of wind power: A European assessment

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  • Boccard, Nicolas

Abstract

We investigate the concomitance of intermittent wind powered generation (WPG) with load to assess its system value as the cost of replacing its output, hour by hour, using more intensively thermal technologies. The difference with its actual cost defines a social cost of wind power which is further divided into a technological and an adequacy component. Whereas the former may become negligible once thermal technologies pay for carbon emissions, the latter is a lower bound on WPG structural weakness w.r.t. thermal technologies. We apply our procedure to Germany, Denmark, Spain, France, Portugal and Ireland using hourly load and WPG data over several years. Our empirical findings show that there is a grain of truth in both the pros and the cons of wind power. The system value of WPG varies from three quarters of the equivalent thermal cost of electricity (on a yearly basis) but the incompressible adequacy cost represents a premium over the cost of serving yearly load in a system ranging around one-fifth.

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  • Boccard, Nicolas, 2010. "Economic properties of wind power: A European assessment," Energy Policy, Elsevier, vol. 38(7), pages 3232-3244, July.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:7:p:3232-3244
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    4. Ambec, Stefan & Crampes, Claude, 2010. "Electricity Production with Intermittent Sources," IDEI Working Papers 608, Institut d'Économie Industrielle (IDEI), Toulouse.
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    7. Zerrahn, Alexander, 2017. "Wind Power and Externalities," Ecological Economics, Elsevier, vol. 141(C), pages 245-260.
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    11. Ambec, Stefan & Crampes, Claude, 2012. "Electricity provision with intermittent sources of energy," Resource and Energy Economics, Elsevier, vol. 34(3), pages 319-336.
    12. Tagliapietra, Simone & Zachmann, Georg & Fredriksson, Gustav, 2019. "Estimating the cost of capital for wind energy investments in Turkey," Energy Policy, Elsevier, vol. 131(C), pages 295-301.
    13. Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers 2013/36, European University Institute.
    14. Ertürk, Mehmet, 2012. "The evaluation of feed-in tariff regulation of Turkey for onshore wind energy based on the economic analysis," Energy Policy, Elsevier, vol. 45(C), pages 359-367.
    15. Stefan Ambec & Claude Crampes, 2010. "Electricity Production with Intermittent Sources of Energy," LERNA Working Papers 10.07.313, LERNA, University of Toulouse.
    16. Fadoua CHIBA, 2016. "Optimal taxation with intermittent generation," Cahiers du GREThA (2007-2019) 2016-26, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    17. Bazmi, Aqeel Ahmed & Zahedi, Gholamreza, 2011. "Sustainable energy systems: Role of optimization modeling techniques in power generation and supply—A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(8), pages 3480-3500.
    18. Rahimiyan, Morteza & Morales, Juan M. & Conejo, Antonio J., 2011. "Evaluating alternative offering strategies for wind producers in a pool," Applied Energy, Elsevier, vol. 88(12), pages 4918-4926.
    19. Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer, 2016. "Why Wind Is Not Coal: On the Economics of Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    20. Fadoua Chiba & Sébastien Rouillon, 2020. "Intermittent Electric Generation Technologies and Smart Meters: Substitutes or Complements," Revue d'économie politique, Dalloz, vol. 130(4), pages 573-613.
    21. Boccard, Nicolas, 2009. "Capacity factor of wind power realized values vs. estimates," Energy Policy, Elsevier, vol. 37(7), pages 2679-2688, July.
    22. Vazquez, Miguel & Hallack, Michelle, 2013. "Need and design of short-term auctions in the EU gas markets," Energy Policy, Elsevier, vol. 63(C), pages 484-493.
    23. Hirth, Lion, 2016. "The benefits of flexibility: The value of wind energy with hydropower," Applied Energy, Elsevier, vol. 181(C), pages 210-223.
    24. Hallack, Michelle & Vazquez, Miguel, 2013. "European Union regulation of gas transmission services: Challenges in the allocation of network resources through entry/exit schemes," Utilities Policy, Elsevier, vol. 25(C), pages 23-32.
    25. Paulus, Moritz & Grave, Katharina & Lindenberger, Dietmar, 2011. "A methodology to estimate security of supply in electricity generation: results for Germany until 2030 given a high level of intermittent electricity feed-in," EWI Working Papers 2011-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

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