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Effects of Changes in Wholesale Electricity Market Structure on Wind Generation in the Midwestern United States

Author

Listed:
  • Steve Dahlke

    (Division of Economics and Business, Colorado School of Mines)

Abstract

This paper estimates the effect of starting the Midcontinent ISO electricity market in 2005 on wind generation. We find an average increase in wind plant capacity factors of 5.0-6.7% associated with the start of the market, relative to neighboring wind plants not in the market. These results are robust to potentially confounding variation associated with wind speed differences determined by weather. The increased capacity factors are likely attributed to reduced wind plant curtailment from operational improvements associated with starting the market, including improved transmission interconnections and more granular generator dispatch scheduling. We formulate a simulation model that demonstrates this mechanism. While there has been plenty of anecdotal evidence from technical experts and market participants that competitive wholesale markets are beneficial for wind energy, this analysis provides the first statistical evidence to support that claim.

Suggested Citation

  • Steve Dahlke, 2017. "Effects of Changes in Wholesale Electricity Market Structure on Wind Generation in the Midwestern United States," Working Papers 2017-02, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp201702
    as

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    File URL: http://econbus-papers.mines.edu/working-papers/wp201702.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
    1. Chan, H. Ron & Fell, Harrison & Lange, Ian & Li, Shanjun, 2017. "Efficiency and environmental impacts of electricity restructuring on coal-fired power plants," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 1-18.
    2. Paul L. Joskow, 2001. "California's Electricity Crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(3), pages 365-388.
    3. Kira R. Fabrizio & Nancy L. Rose & Catherine D. Wolfram, 2007. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency," American Economic Review, American Economic Association, vol. 97(4), pages 1250-1277, September.
    4. Kirby, Brendan & Milligan, Michael, 2008. "Facilitating Wind Development: The Importance of Electric Industry Structure," The Electricity Journal, Elsevier, vol. 21(3), pages 40-54, April.
    5. Sioshansi, Fereidoon P., 2006. "Electricity Market Reform: What Have We Learned? What Have We Gained?," The Electricity Journal, Elsevier, vol. 19(9), pages 70-83, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    electricity market; renewable energy; wind energy; energy economics; wind generation;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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