The economics of wind power with energy storage

Abstract

We develop a nonlinear mathematical optimization program for investigating the economic and environmental implications of wind penetration in electrical grids and evaluating how hydropower storage could be used to offset wind power intermittence. When wind power is added to an electrical grid consisting of thermal and hydropower plants, it increases system variability and results in a need for additional peak-load, gas-fired generators. Our empirical application using load data for Alberta's electrical grid shows that costs of wind-generated electricity vary from $37 per MWh to $68/MWh, and depend primarily on the wind profiles of installed turbines. Costs of reducing CO 2 emissions are estimated to be $41–$56 per t CO 2. When pumped hydro storage is introduced in the system or the capacity of the water reservoirs is enhanced, the hydropower facility could provide most of the peak load requirements obviating the need to build large peak-load gas generators.