January 30, 2011

The Hidden System Costs of Wind Generation in a Deregulated Electricity Market

by Tim Mount, Surin Maneevitjit, Alberto J. Lamadrid, Ray D. Zimmerman and Robert J. Thomas

- Earlier research has shown that adding wind capacity to a network can lower the total annual operating cost of meeting a given pattern of loads by displacing conventional generation. At the same time, the variability of wind generation and the need for higher levels of reserve generating capacity to maintain reliability standards impose additional costs on the system that should not be ignored. The important implication for regulators is that the capacity payments for eachMW of peak system load is now much higher. Hence, the economic benefits to a network of using storage, controllable load and other mechanisms to reduce the peak system load will be higher with high penetrations of wind generation. These potential benefits are illustrated in a case study using a test network and a security constrained OPF with endogenous reserves (SuperOPF).

Mount, T., S. Maneevitjit, A.J. Lamadrid, R.D. Zimmerman and R.J. Thomas (2011). "The Hidden System Costs of Wind Generation in a Deregulated Electricity Market." Cornell University, Charles H. Dyson School of Applied Economics and Management, Working Paper No. 11.01, Jan 2011.