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Economic costs of managing of an electricity grid with increasing wind power penetration

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  • RYAN PRESCOTT
  • G. CORNELIS VAN KOOTEN

Abstract

We examine the impact of policy choices, including a carbon tax, on the optimal allocation of power across different generation sources and on future investments in generating facilities. The main focus is on the Alberta power grid, as it is heavily dependent on fossil fuels and has only limited ties to other power grids, although the model could be extended to larger (and even multiple) grids. The results indicate that, as wind penetrates the extant generating mix characterizing the grid, cost savings and emission reductions do not decline linearly but at a decreasing rate. However, if flexibility is allowed, then, as the carbon tax increases to C$40/tCO 2 or above, existing coal plants start to be replaced by newly constructed wind farms and natural gas plants. If coal can be completely eliminated from the energy mix and replaced by natural gas and wind, substantial savings of 31.03 Mt CO 2 (58% of total emissions) can result. However, this only occurs for carbon taxes of over C$170/tCO 2 . The associated high capital costs of new generating facilities may thus not be an ideal use of funds for addressing climate change.

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  • Ryan Prescott & G. Cornelis Van Kooten, 2009. "Economic costs of managing of an electricity grid with increasing wind power penetration," Climate Policy, Taylor & Francis Journals, vol. 9(2), pages 155-168, January.
    • Handle: RePEc:taf:tcpoxx:v:9:y:2009:i:2:p:155-168
    DOI: 10.3763/cpol.2007.0425
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    Cited by:

    1. Scorah, Hugh & Sopinka, Amy & van Kooten, G. Cornelis, 2012. "The economics of storage, transmission and drought: integrating variable wind power into spatially separated electricity grids," Energy Economics, Elsevier, vol. 34(2), pages 536-541.
    2. G. Cornelis van Kooten & Govinda R. Timilsina, 2008. "Wind Power Development: Opportunities and Challenges," Working Papers 2008-13, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    3. Jon Duan & G. Cornelis van Kooten & A. T. M. Hasibul Islam, 2023. "Calibration of Grid Models for Analyzing Energy Policies," Energies, MDPI, vol. 16(3), pages 1-21, January.
    4. Timilsina, Govinda R. & Cornelis van Kooten, G. & Narbel, Patrick A., 2013. "Global wind power development: Economics and policies," Energy Policy, Elsevier, vol. 61(C), pages 642-652.
    5. Scorah, Hugh & Sopinka, Amy & van Kooten, G. Cornelis, 2010. "Managing Water Shortages in the Western Electricity Grids," Working Papers 59701, University of Victoria, Resource Economics and Policy.

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