23 Pages Posted: 25 Dec 2013
Date Written: December 24, 2013
Balancing power (regulating power, control power) is used to quickly restore the supply-demand balance in power systems. Variable renewable energy sources (VRE) such as wind and solar power, being stochastic in nature, ceteris paribus increase the need for short-term balancing. Their impact on reserve requirements is heavily discussed in academic and policy circles and often thought to be large. The paper contrasts a literature survey and model results with descriptive statistics of empirical market data from Germany, providing surprising insights: all models predict VRE to increase balancing reserve requirements - however, despite German VRE capacity doubled during the last five years, balancing reserves decreased by 20%, and procurement cost fell by 50%. Other factors, such as increased TSO cooperation and the recession, must have overcompensated for the growth of renewables. To the extent this specific German experience can be generalized, we interpret this as an indication that balancing power is not necessarily a major barrier to VRE integration at moderate penetration rates. Next to reserve requirements, the paper discusses two additional links between renewables and balancing systems: the supply of balancing power by renewables; and the role of the imbalance price as incentive for forecast improvements. Reviewing these three links, the paper also provides a comprehensive overview of balancing systems.
Keywords: balancing power; control power; regulating power; variable renewables; wind power; solar power; market design; renewables system integration
JEL Classification: D42, L94, Q48
Suggested Citation: Suggested Citation
Hirth, Lion and Ziegenhagen, Inka, Balancing Power and Variable Renewables: A Glimpse at German Data (December 24, 2013). USAEE Working Paper No. 13-154. Available at SSRN: https://ssrn.com/abstract=2371752 or http://dx.doi.org/10.2139/ssrn.2371752