Build wind capacities at windy locations?
Assessment of system optimal wind locations under feed-in tariffs
2017 ASSA/AEA Annual Meeting, Chicago, 6-8th January
Frank Obermüller
Institute of Energy Economics at the University of Cologne
Motivation
Aim for market integration of renewables
IEA Report (June 2016):
„[Renewable subsidy] plans should
be based on the long-term value of
VRE to the power and wider
energy system.“
“Next-generation approaches need
to factor in the system value of
electricity from wind and solar
power”
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Motivation
Value of a wind turbine to the market
•
Market value of wind production:
with:
1. Hirth:
“The market value of variable renewables: The
“Spatial dependencies of wind power and
interrelations with spot price dynamics.” European
Journal of Operational Research 241 (2015)
Market value
effect of solar wind power variability on their
relative price." Energy economics 38 (2013)
2. Elberg, Hagspiel:
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
Expected market value of wind
[EUR/MWh]
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Motivation
But: Uniform pricing can be inefficient!
•
Market value of wind production:
with:
 Several electricity markets have uniform pricing, e.g. Europe
 In uniform pricing, grid situations may not be internalized sufficiently
 This can lead to inefficient capacity allocations and production situations
•
Improvement:
System value of wind production:
with:
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Methodology
Nodal Electricity Market Model
Nodal electricity market model
•Minimization of total system costs
•Electricity balance restriction (supply=demand)
•Model and input data are open source
•Website: www.Pypsa.org
Some model facts:
•Research Focus on Germany
1. Uniform pricing
2. regional different wind situations
3. high share of installed wind capacities
•585 nodes
•852 lines
•DC-loadflow model
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Methodology
Nodal Electricity Market Model
Additional input:
High-resolution wind data
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Results
System value of regional wind production
Regional System Value of Wind
(Nodal pricing)
Frequency
Histogram
Wind value [100%]
The Regional System Value of Wind Production could have structural
breaks, e.g., as in Germany
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
*) Note: Colormap is restricted to a
minimum of 80% for comparison reasons
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Results
Comparison: System Value vs. Market Value
Regional System Value of Wind
Regional Market Value of Wind
(Nodal pricing)
(Uniform pricing)
The regional value of wind is strongly dependent on the pricing regime
(and thus on the grid situation)
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Results
Comparison: Regional market profits
Market profit under Nodal pricing
Can be considered as efficient
benchmark since grid situation is
internalized to market profits
Market profit under Uniform pricing
Uniform pricing may favor regions
which are not system optimal and,
e.g., increase grid congestions
The pricing regime (nodal vs. uniform) influences the regional market profits.
Under uniform pricing, inefficient allocations may be incentivized
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Results
Comparison: Nodal market profit vs. Fixed FiT
Market profit under Nodal pricing
(for 1 MW turbine, 1 year)
Wind profit of Fixed Feed-in Tariff
(for 1 MW turbine, 20 years)
A Fixed Feed-in Tariff (without a regional component) does not
sufficiently consider the regional value of wind and may favor different
(sub-optimal) wind locations
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Conclusion
1. Contribution to existing research:
a. Quantification of (1) regional system values, (2) regional market values, and (3)
fixed feed-in remunerations for German wind production
2. Findings:
a. The Regional System Value of Wind Production could have structural breaks,
e.g., as in Germany
b. The pricing regime (nodal vs. uniform) influences the regional market profits.
Under uniform pricing, inefficient allocations may be incentivized
c. A Fixed Feed-in Tariff (without a regional component) does not sufficiently
consider the regional value of wind and may favor different (sub-optimal) wind
locations
3. Conclusion:
a. A well-designed subsidy scheme needs to incorporate the regional system value
b. This can be achieved, e.g., via nodal pricing and a market price component
c. A fixed feed-in tariff may set wrong capacity allocation incentives
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
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Exploring Energy Markets – Enhancing Decisions!
Frank Obermüller
[email protected]
EWI – Institute of Energy Economics at the University of Cologne
ewi Energy Research & Scenarios gGmbH
Alte Wagenfabrik
Vogelsangerstraße 321
D-50827 Cologne
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
Backup / Appendix
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
Backup
Reimbursements of fixed feed-in tariff
1
2
Wind profit of Fixed Feed-in Tariff
Modelled wind
production data per
turbine
Calculated
reimbursements based
on Fixed Feed-in Tariff
Regional wind values | Jan. 07, 2017 | ASSA/AEA Annual Meeting | Frank Obermüller
Of an exemplary wind turbine:
-
1 MW Turbine
-
66m Hub-Height
-
2380 m2 swept area
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