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Area price and demand response in a market with 25% wind power

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  • Grohnheit, Poul Erik
  • Andersen, Frits Møller
  • Larsen, Helge V.

Abstract

Denmark, east and west of the Great Belt are bidding areas with separate hourly area prices for the Nord Pool power exchange, covering four Nordic countries and parts of Germany. The share of wind power has now increased to 25% on an annual basis in western Denmark. This has a significant impact not only on the electricity wholesale prices, but also on the development of the market. Hourly market data are available from the website of Danish TSO from 1999. In this paper these data are analysed for the period 2004–2010. Electricity generators and customers may respond to hourly price variations, which can improve market efficiency, and a welfare gain is obtained. An important limitation for demand response is events of several consecutive hours with extreme values. The analysis in this paper is a summary and update of some of the issues covered by the EU RESPOND project. It shows that extreme events were few, and the current infrastructure and market organisation have been able to handle the amount of wind power installed so far. This recommends that geographical bidding area for the wholesale electricity market reflects external transmission constraints caused by wind power.

Suggested Citation

  • Grohnheit, Poul Erik & Andersen, Frits Møller & Larsen, Helge V., 2011. "Area price and demand response in a market with 25% wind power," Energy Policy, Elsevier, vol. 39(12), pages 8051-8061.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:12:p:8051-8061
    DOI: 10.1016/j.enpol.2011.09.060
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    References listed on IDEAS

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    1. Klinge Jacobsen, Henrik & Zvingilaite, Erika, 2010. "Reducing the market impact of large shares of intermittent energy in Denmark," Energy Policy, Elsevier, vol. 38(7), pages 3403-3413, July.
    2. Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
    3. Severin Borenstein, 2005. "The Long-Run Efficiency of Real-Time Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 93-116.
    4. Stephen P. Holland & Erin T. Mansur, 2006. "The Short-Run Effects of Time-Varying Prices in Competitive Electricity Markets," The Energy Journal, , vol. 27(4), pages 127-156, October.
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    Cited by:

    1. Katz, Jonas, 2014. "Linking meters and markets: Roles and incentives to support a flexible demand side," Utilities Policy, Elsevier, vol. 31(C), pages 74-84.
    2. repec:dau:papers:123456789/15247 is not listed on IDEAS
    3. Grohnheit, Poul Erik & Sneum, Daniel Møller, 2023. "Calm before the storm: Market prices in a power market with an increasing share of wind power," Energy Policy, Elsevier, vol. 179(C).
    4. Per B. Solibakke, 2022. "Step‐ahead spot price densities using daily synchronously reported prices and wind forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(1), pages 17-42, January.
    5. Klinge Jacobsen, Henrik & Schröder, Sascha Thorsten, 2012. "Curtailment of renewable generation: Economic optimality and incentives," Energy Policy, Elsevier, vol. 49(C), pages 663-675.
    6. Prüggler, Natalie, 2013. "Economic potential of demand response at household level—Are Central-European market conditions sufficient?," Energy Policy, Elsevier, vol. 60(C), pages 487-498.

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