Intermittency or Uncertainty? Impacts of Renewable Energy in Electricity Markets
60 Pages Posted: 8 Sep 2022
Date Written: 2022
Abstract
Renewable energy resources possess unique characteristics—intermittency and uncertainty— that pose challenges to electricity grid operations. We study these characteristics and find that uncertainty, represented by wind forecast error, has larger grid impacts than intermittency, or hourly generation changes. Uncertainty yields roughly double the price effects and roughly double the number of conventional generator start-ups, as compared to perfectly forecast wind. While this finding is important given the persistence of wind forecast error over the study period, reducing wind forecast error to the level of demand forecast error would lower costs by a modest half a million dollars per year.
Keywords: renewable energy, electricity prices and price dispersion, electricity grid management
JEL Classification: Q400, Q420, Q470
Suggested Citation: Suggested Citation