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Spatial Effects of Wind Generation and Its Implication for Wind Farm Investment Decisions in New Zealand

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  • Le Wen
  • Basil Sharp
  • Erwann Sbai

Abstract

Spill-over effects on electricity nodal prices associated with increased wind generation have not been examined in the literature. To examine these effects, we use spatial econometric models to estimate the direct and indirect effects of wind generation on nodal wholesale electricity prices. Spatial econometric models allow us to provide quantitative estimates of spill-over magnitudes and statistical tests for significance. Results show negative and significant effects are associated with increases in wind penetration, and the effect is stronger during peak hours and weaker during off-peak hours. Simulation results demonstrate net savings of NZ$8 million per MW of additional wind capacity installed at the CNI2 wind site. The findings provide valuable information on the evaluation of wind farm development in terms of site location, wholesale prices, and financial feasibility. Our approach also contributes to forecasting location specific wholesale electricity prices, and provides a better understanding of the implications of locating wind sites.

Suggested Citation

  • Le Wen & Basil Sharp & Erwann Sbai, 2020. "Spatial Effects of Wind Generation and Its Implication for Wind Farm Investment Decisions in New Zealand," The Energy Journal, , vol. 41(2), pages 47-72, March.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:2:p:47-72
    DOI: 10.5547/01956574.41.2.lwen
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    References listed on IDEAS

    as
    1. Suomalainen, Kiti & Pritchard, Geoffrey & Sharp, Basil & Yuan, Ziqi & Zakeri, Golbon, 2015. "Correlation analysis on wind and hydro resources with electricity demand and prices in New Zealand," Applied Energy, Elsevier, vol. 137(C), pages 445-462.
    2. Alessandra Faggian & Philip McCann, 2009. "Human capital, graduate migration and innovation in British regions," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(2), pages 317-333, March.
    3. Mason, I.G. & Page, S.C. & Williamson, A.G., 2010. "A 100% renewable electricity generation system for New Zealand utilising hydro, wind, geothermal and biomass resources," Energy Policy, Elsevier, vol. 38(8), pages 3973-3984, August.
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