Wind Power and Electricity Prices at the PJM Market

Abstract

Increased deployment of wind-power generation is changing the landscape of power supply around the world. When integrated with electricity markets, wind power is also widely known to influence the prices cleared at the market. This paper examines the effect of wind-power generation on the day-ahead market prices in the PJM electricity market using robust econometric models and statistical inference. Results show that the quantified expected benefits to wholesale market participants may be substantial despite the relatively low wind-power penetration levels still observed within the PJM jurisdiction relative to other markets. The quantified unitary benefits outweigh, by a great margin, the renewable energy credits given to qualifying wind farms across the market. When benefits outweigh the costs incurred to generate them, welfare is accrued. To this end, benefit allocation mechanisms are proposed, which may contribute to the continued development of wind power on the roadmap to a cleaner power industry of the future.