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Now or Later? Trading wind power closer to real-time and how poorly designed subsidies lead to higher balancing costs

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Abstract

An important challenge facing many deregulated electricity markets is dealing with the increasing penetration of intermittent generation. Simulation studies have pointed to the advantages of trading closer to real-time with large amounts of intermittent generation. Using Danish data, I show that, as expected, shortfalls increase the probability of trade on the shortterm market. But in the period between 2010 and 2012 surpluses are shown to decrease the probability of trade. This unexpected result is likely explained by wind power policies that discourages trading on Elbas and leads to unnecessarily high balancing costs. I use a rollingwindow regression to support this claim.

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  • Mauritzen, Johannes, 2013. "Now or Later? Trading wind power closer to real-time and how poorly designed subsidies lead to higher balancing costs," Discussion Papers 2013/1, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2013_001
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    File URL: http://www.nhh.no/Files/Filer/institutter/for/dp/2013/0113.pdf
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    More about this item

    Keywords

    Deregulated electricity markets; intermittent generation; wind power;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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