The impact of wind generation on wholesale electricity market prices in the midcontinent independent system operator energy market: An empirical investigation

Abstract

The Midcontinent Independent System Operator (MISO) is the second largest organized competitive wholesale electricity market in the U.S. Wholesale electricity prices in MISO have decreased over the past several years, as both natural gas prices have fallen, and large amounts of wind generation capacity have been added. Using an empirical econometric approach studying historical hourly real-time electricity prices, load, natural gas prices, and other MISO market data, a series of econometric models are estimated using historical data from 2008 to 2016, to identify the impact of increased wind generation on wholesale electricity prices in MISO. This is the first such empiric study for MISO, the largest wholesale electricity market by geography in the world. Furthermore, this is the first empiric study estimating impacts of wind generation on electricity price that utilizes a comprehensive set of predictor variables to control for many sources of potential bias. The results show a statistically significant impact of wind generation on real-time hourly MISO system prices, ranging from an estimated decrease of $0.14 to $0.34 per mega-watt hour, for each 100 mega-watt hours of additional wind generation. It is observed that the estimated marginal impacts of additional wind generation have declined over time. This is likely attributable to the long-term shifts in the supply and demand dynamics experienced in the MISO energy market, as well as to changes made to the MISO market structure to better accommodate variable generation.