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High penetration wind generation impacts on spot prices in the Australian national electricity market

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  • Cutler, Nicholas J.
  • Boerema, Nicholas D.
  • MacGill, Iain F.
  • Outhred, Hugh R.

Abstract

This paper explores wind power integration issues for the South Australian (SA) region of the Australian National Electricity Market (NEM) by assessing the interaction of regional wind generation, electricity demand and spot prices over 2 recent years of market operation. SA's wind energy penetration has recently surpassed 20% and it has only a limited interconnection with other regions of the NEM. As such, it represents an interesting example of high wind penetration in a gross wholesale pool market electricity industry. Our findings suggest that while electricity demand continues to have the greatest influence on spot prices in SA, wind generation levels have become a significant secondary influence, and there is an inverse relationship between wind generation and price. No clear relationship between wind generation and demand has been identified although some periods of extremely high demand may coincide with lower wind generation. Periods of high wind output are associated with generally lower market prices, and also appear to contribute to extreme negative price events. The results highlight the importance of electricity market and renewable policy design in facilitating economically efficient high wind penetrations.

Suggested Citation

  • Cutler, Nicholas J. & Boerema, Nicholas D. & MacGill, Iain F. & Outhred, Hugh R., 2011. "High penetration wind generation impacts on spot prices in the Australian national electricity market," Energy Policy, Elsevier, vol. 39(10), pages 5939-5949, October.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:10:p:5939-5949
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    References listed on IDEAS

    as
    1. Nicholas Cutler & Hugh Outhred & Iain MacGill, 2009. "The Integration of Wind Generation within the South Australian Region of the Australia National Electricity Market," Environmental Economics Research Hub Research Reports 0938, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
    2. Klessmann, Corinna & Nabe, Christian & Burges, Karsten, 2008. "Pros and cons of exposing renewables to electricity market risks--A comparison of the market integration approaches in Germany, Spain, and the UK," Energy Policy, Elsevier, vol. 36(10), pages 3646-3661, October.
    3. Nicholas Boerema & Merlinde Kay & Iain MacGill, 2010. "Renewable energy integration into the Australian National Electricity Market: Characterising the energy value of wind and solar generation," Environmental Economics Research Hub Research Reports 1088, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
    4. Holttinen, H., 2005. "Optimal electricity market for wind power," Energy Policy, Elsevier, vol. 33(16), pages 2052-2063, November.
    5. MacGill, Iain, 2010. "Electricity market design for facilitating the integration of wind energy: Experience and prospects with the Australian National Electricity Market," Energy Policy, Elsevier, vol. 38(7), pages 3180-3191, July.
    6. Boerema, Nicholas & Kay, Merlinde & MacGill, Iain, 2010. "Renewable energy integration into the Australian National Electricity Market: Characterising the energy value of wind and solar generation," Research Reports 107740, Australian National University, Environmental Economics Research Hub.
    7. Cutler, Nicholas & MacGill, Iain & Outhred, Hugh, 2009. "The Integration of Wind Generation within the South Australian Region of the Australia National Electricity Market," Research Reports 94887, Australian National University, Environmental Economics Research Hub.
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