Presentation by Ewa Lazarczyk Carlson, Assistant professor, Reykjavik University (School of Business) and IFN

1. Wind
energy
– challenges
Ewa
Lazarczyk
Carlson
ewalazarczyk@ru.is
1

2. Windmills
– over
time…
2

3. Windmills
– over
time…
3

4. Windmills
– over
time…
4

5. EU
wind
capacity
in
MW
Installed
2014
End
2014 Installed
2015
End
2015
Denmark 104.9 4881.7 216.8 5063.8
France 1042.1 9285.1 1073.1 10358.2
Germany 5242.5 39127.9 6013.4 44946.1
Poland 444.3 3833.8 1266.2 5100
Spain 27.5 23025.3 -­‐ 23025.3
Sweden 1050.2 5424.8 614.5 6024.8
Norway 48 819.3 22.5 837.6
Source: EWEA: Wind in power, 2015 European statistics, February 2016
Denmark has one of the
largest share of wind power
use in the world - in 2013
33.2 percent of the Danish
electricity consumption was
covered by wind.
5

6. Source: EWEA: Wind in power, 2015 European statistics, February 2016 6

7. Current
statistics
• In
2015
across
the
28
EU
member
states,
wind
accounted
for:
• 44%
of
all
new
power
installations,
• connecting
a
total
of
12.8GW
to
the
grid
• 9,766MW
in
onshore
and
3,034MW
offshore.
• The
volume
of
new
installations
was
6.3%
higher
as
compared
with
2014.
• Total
wind
capacity
in
Europe
now
stands
at
142GW
and
covers
11.4%
of
Europe’s
electricity
needs.
(2016,
EWEA)
7

8. European
targets
• 2020
renewable
energy
targets
• The
EU's
Renewable
energy
directive
sets
a
binding
target
of
20%
final
energy
consumption
from
renewable
sources
by
2020.
To
achieve
this,
EU
countries
have
committed
to
reaching
their
own
national
renewables
targets
ranging
from
10%
in
Malta
to
49%
in
Sweden.
https://ec.europa.eu/energy/en/topics/renewable-­‐energy 8

9. Wind
energy
– challenges
• “Merit
order
effect”
• Increased
price
volatility
• Increased
wear
and
tear
• Balancing
issues
• Towards
the
European
Balancing
Market
• “[…]
a
cross
border
balancing
market
will
help
to
counteract
the
effects
of
intermittent
generation
and
allow
the
integration
of
more
renewable
energy
sources”.
9

10. 10

11. “Merit
order
effect”
• Price-­‐reduction
effect
of
wind
power
due
to
displacing
of
expensive
generation
with
cheap
wind.
• Demonstrated
for
Spain
(Gil
et
al.
2012),
Germany
(Ketterer 2014),
Denmark
(Jacobsen
and
Zvingilaite 2010),
California
(Woo
et
al.
2016)
and
many
others
• Adverse
effect
on
conventional
power
plants
-­‐>
capacity
markets
-­‐>
weaker
investment
incentive
for
CCGT
plants
(Steggals et
al.
2011)
• Lower
income
for
renewable
generation
-­‐>
the
relative
market
value
of
renewables
decreases
with
higher
intermittent
shares
(all
else
being
equal)
(Hirth 2013)
(their
income
per
generated
unit
of
electricity
relative
to
the
average
market
price
decreases)
http://www.nasdaqomx.com/digitalAssets/86/86050_npspotjune112013.pdf
11

12. Increased
price
volatility
• Residual
load
is
usually
more
volatile
than
the
demand
alone
(Green
and
Vasilakos 2010)
• With
a
sufficiently
large
share
of
wind
generation,
hourly
wind
output
volatility
would
have
a
strong
influence
over
wholesale
spot
prices.
(G&V)
• Negative
prices
are
supposed
to
incentivize
the
restructuring
of
the
power
system:
inflexible
plants
pay
for
producing
while
demand
storage
and
demand
management
could
bring
benefits
12

13. Increased
wear
and
tear
• The
frequent
start-­‐ups
and
shut-­‐downs
put
a
strain
on
conventional
generators
-­‐-­‐>
frequent
failures
or
increased
needs
for
maintenance
compared
to
when
wind
power
is
not
part
of
the
energy
mix
(Troy
et
al.,
2010;
Troy,
2011;).
• The
cost
of
operating
the
power
system
as
a
whole
increases
already
at
the
10%
of
wind
power
penetration
(Georgilakis 2008).
• It
is
increasingly
difficult
to
put
one
number
on
the
costs
related
with
frequent
start-­‐ups
and
shut-­‐downs
of
the
conventional
power
plants.
• for
e.g.
a
gas
unit
has
been
found
to
range
from
$300
to
$80,000
in
the
operation
and
maintenance
costs
• “(…)
uncertainty
surrounding
cycling
cots
can
lead
to
these
costs
being
under-­‐estimated
by
generators,
which
in
turn
can
lead
to
increased
cycling”
(Troy
2011).
13

14. Balancing
• Imbalances
due
to
intermittent
power
increase,
so
number
of
unscheduled
flows
rises
• Currently
TSOs
are
starting
up
the
process
of
defining
the
rules
of
cooperation.
• Network
codes
on
balancing
and
reserves
have
recently
been
developed
by
ENTSO-­‐E
European network of transmission
system operators for electricity 14

15. https://www.entsoe.eu/Documents/Network%20codes%20documents/Implementation/Pilot_Projects/pilot_projects_map.png
TERRE:
Trans-­‐European
Replacement
Reserves
Exchange
established
between
UK,
France,
Spain,
Portugal,
Italy,
Switzerland
and
Greece
15

16. Cooperative
balancing
• Exchange
of
reserves
allows
for
cost
arbitrage
• Makes
it
possible
to
procure
part
of
the
required
level
of
reserves
in
adjacent
zone/area
but
these
reserves
are
exclusively
for
one
TSO
-­‐ they
cannot
contribute
to
meeting
another
TSO’s
required
level
of
reserves.
• Expensive
reserves
can
be
substituted
for
cheaper
• Reserves
sharing
allows
both
cost
arbitrage
and
variance
reducing
pooling
of
reserve
needs
• Allows
multiple
TSOs
to
take
into
account
the
same
reserves
to
meet
their
reserve
requirements
resulting
from
reserve
dimensioning.
• Less
reserve
capacity
is
needed
• Expensive
reserves
can
be
substituted
for
cheaper
16

17. Thank
you.
17

18. Literature
• Woo
C.K.,
Moorse.
J,
Schneiderman B.,
Ho.
T.,
Olson,
A.,
Alagappan.
L,
Chawla.
K.,
Toyama.
N.,
Zarnikau.
J.,
Merit-­‐order
effects
of
renewable
energy
and
price
divergence
in
California’s
day-­‐
ahead
and
real-­‐time
electricity
markets.
Energy
Policy,
V
92,
May,
2016,
pp.
299
– 312.
• Nicolosi,
M.,
Wind
power
integration
and
power
system
flexibility–An
empirical
analysis
of
extreme
events
in
Germany
under
the
new
negative
price
regime,
Energy
Policy.
3.
2010.
pp.
7257
– 7268.
• Steggals,
W.,
Gross.
R.,
Heptonstall,
P.
Winds
of
change:
How
high
wind
penetrations
will
affect
investment
incentives
in
the
GB
electricity
sector.
Energy
Policy,
39,
2011,
pp.
1389
– 1396.
• Baldursson,
F.
M.,
Lazarczyk,
E.,
Ovaere,
M.,
&
Proost,
S.
2016a.
Cross-­‐border
Exchange
and
Sharing
of
Generation
Reserve
Capacity.
IAEE
Energy
Forum.
July.
• Baldursson,
F.
M.,
Lazarczyk,
E.,
Ovaere,
M.,
&
Proost,
S.
2016b.
Multi-­‐TSO
system
reliability:
Cross-­‐border
balancing.
IEEE
International
Energy
Conference
(ENERGYCON).
• Fogelberg,
S.,
Lazarczyk,
E.,
2015,
Wind
Power
Volatility
and
the
Impact
on
Failure
Rates
in
the
Nordic
Electricity
Market,
IFN
Working
Paper
1065.
18

19. Literature
• Hirth,
L.,
2013.
The
market
value
of
renewables:
the
effect
of
solar
and
wind
power
variability
on
their
relative
price.
Energy
Economics.
38.
pp.
218
– 236.
• Gil
H.A.,
Gomez-­‐Quiles,
C.,
Riquelme,
J.,
2012,
Large
scale
wind
power
integration
and
wholesale
electricity
trading
benefits:
Estimation
via
ex
post
approach
Energy
Policy
41.
pp.
849
– 859.
• Ketterer 2014,
The
impact
of
wind
power
generation
on
the
electricity
price
in
Germany.
Energy
Economics.
44.
pp.
270
– 280.
• Jacobsen
and
Zvingilaite,
2010,
Reducing
the
market
impact
of
large
shares
of
intermittent
energy
in
Denmark.
Energy
Policy.
38(7).
3304-­‐ 3413.
• Georgilakis,
P.S.
(2008).
“Technical
challenges
associated
with
the
integration
of
wind
power
into
power
systems.”
Renewable
and
Sustainable
Energy
Reviews
12,
pp.
852-­‐863.
• Kumar,
N.,
Besuner,
P.,
Lefton.
S.,
Agan,
D.
and
D.
Hilleman
(2012).
“Power
plant
cycling
costs.”
NREL.
Accessed
on
April
13th
2015
from
http://www.osti.gov/scitech/biblio/1046269
• Troy,
N.,
Denny,
E.
and
M.
O’Malley
(2010).
“Base-­‐load
cycling
on
a
system
with
significant
wind
penetration.”
IEEE
Transactions
on
power
systems 25,
pp.
1088-­‐1097
• Troy,
N.
(2011).
Generator
cycling
due
to
high
penetrations
of
wind
power. Doctoral
Thesis,
School
of
Electrical,
Electronic
and
Communications
Engineering,
University
College
Dublin,
Ireland.
• Kumar,
N.,
Besuner,
P.,
Lefton.
S.,
Agan,
D.
and
D.
Hilleman
(2012).
“Power
plant
cycling
costs.”
NREL.
Accessed
on
April
13th
2015
from
http://www.osti.gov/scitech/biblio/1046269
• Green,
R.,
Vasilakos,
N.,
2010,
Market
behaviour with
large
amounts
of
intermittent
generation.
Energy
Policy.
38.
pp.
3211
– 3220.
19

20. Sources
for
images
• https://en.wikipedia.org/wiki/Windmill
• http://www.lehuaparker.com/2014/06/18/tilting-­‐at-­‐windmills/
• https://en.wikipedia.org/wiki/History_of_wind_power#Antiquity
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