Locational (In-)Efficiency of Renewable Power Generation Feeding in the Electricity Grid: A Spatial Regression Analysis

FCN Working Paper No. 13/2018

42 Pages Posted: 15 Jan 2019 Last revised: 2 Jul 2020

See all articles by Tim Höfer

Tim Höfer

RWTH Aachen University

Reinhard Madlener

RWTH Aachen University

Date Written: October 1, 2018

Abstract

This paper analyzes the negative external effects caused by the introduction of variable renewable energy sources into an inflexible power system. We investigate the costs that arise due to the need for temporarily reducing their output to relief grid overstress in the case of high electricity feed-in. The responsible system operator has to remunerate the power plant operator for this lost output. The resulting costs for the system operator, the so-called feed-in management costs, are passed on to the end-consumers in the respective region via the grid use tariff scheme. In this paper, we develop a two-part regression model that explains (i) the occurrence of feed-in management and (ii) the regional variation of feed-in management costs. In the first part, we use a logit model to explain why some regions experienced feed-in management in recent years and others did not. The second part covers an augmented spatial econometric model that investigates the interregional variability of feed-in management costs. The estimates of both models show that especially the installed capacity of wind energy connected to the medium and high voltage level have a negative impact on feed-in management and that high load in a region reduces the need for feed-in management measures. The augmented spatial model indicates for the case of four major DSOs in Germany that an increase by 1 MW of wind energy capacity at the medium and high voltage level lead to an increase in feed-in management costs by 1.9% and 0.9% in regions that already experienced feed-in management, respectively. The policy implication of this finding is that price signals for thFM, Spatial Econometrics, System Integration Cost, Grid-Related Cost, Renewable Energye reinforcement of the grid infrastructure or for the siting of VRES should be given.

Keywords: FM, Spatial Econometrics, System Integration Cost, Grid-Related Cost, Renewable Energy

JEL Classification: C33, R10, R58, Q42

Suggested Citation

Höfer, Tim and Madlener, Reinhard, Locational (In-)Efficiency of Renewable Power Generation Feeding in the Electricity Grid: A Spatial Regression Analysis (October 1, 2018). FCN Working Paper No. 13/2018, Available at SSRN: https://ssrn.com/abstract=3310222 or http://dx.doi.org/10.2139/ssrn.3310222

Tim Höfer (Contact Author)

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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