Changes in the economic value of wind energy and flexible resources at increasing penetration levels in the Rocky Mountain Power Area

Abstract

ABSTRACTWe use a consistent economic framework to estimate the long‐run economic value of wind while including operational constraints for conventional generation and hourly variation in wind and load. Day‐ahead forecast errors in wind are corrected in the real‐time, after commitment decisions for many thermal generators have already been made. The framework is used to estimate the change in the marginal economic value of wind with increasing penetration in the Rocky Mountain Power Area of the USA. We also evaluate the marginal economic benefit to wind energy of implementing several strategies to manage wind energy variability and uncertainty: more flexible conventional generation, real‐time pricing, low cost bulk energy storage, and increased geographic diversity of wind plant siting. Without mitigation, the marginal economic value of wind is found to decrease by $21 MWh (37% of the marginal value of wind at 0% penetration) as wind penetration increases from 0% to 30%. The decline is largely because of the hourly profile of wind output and day‐ahead wind energy forecast errors; factors whose impact is reduced by the mitigation strategies. With mitigation, the marginal value of wind at the 30% penetration level is $6‐$11 MWh greater than the value without the measures (17‐31% increase in value). Although the marginal value of wind energy decreases with increasing penetration in this region, several different types of mitigation strategies are available and should be investigated in more detail. Copyright © 2013 John Wiley & Sons, Ltd.