Estimating the value of wind energy using electricity locational marginal price

Abstract

There is an increasing interest in adding renewables such as wind to electricity generation portfolios in larger amounts as one response to concern about atmospheric carbon emissions from our energy system and the resulting climate change. Most policies with the aim of promoting renewables (e.g., RPS, FIT) do not explicitly address siting issues, which for wind energy are currently approached as the intersection of wind resource, land control, and transmission factors. This work proposes the use of locational marginal price (LMP), the location and time specific cost of electricity on the wholesale market, to signal locations where generation can address electricity system insufficiency. After an examination of the spatial and temporal behavior of LMP in Michigan over the first two years of wholesale market operation, this work combines LMP with wind speed data to generate a value metric. High value sites in Michigan tend to be sites with higher wind speeds, with the bulk of value accruing in the fall and winter seasons.