The Long-term Impact of Wind Power on Electricity Prices and Generating Capacity

Richard Green and Nicholas Vasilakos ()

Discussion Papers from Department of Economics, University of Birmingham

Abstract: This paper uses a market equilibrium model to calculate how the mix of generating capacity would change if large amounts of intermittent renewables are built in Great Britain, and what this means for operating patterns and the distribution of prices over time. If generators bid their marginal costs, we find that the changes to the capacity mix are much greater than the changes to the pattern of prices. Thermal capacity falls only slightly in response to the extra wind capacity, and there is a shift towards power stations with higher variable costs (but lower fixed costs). The changes to the pattern of prices, once capacity has adjusted, are relatively small. In an oligopolistic setting, strategic generators will choose lower levels of capacity. If wind output does not receive the market price, then mark-ups on thermal generation will be lower in a system with large amount of wind power.

Keywords: Electricity Markets; Wind Generation; Intermittent Output; Capacity Mix (search for similar items in EconPapers)
JEL-codes: L74 Q42 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011-03
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:11-09

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