The incentive to invest in thermal plants in the presence of wind generation

Valeria Di Cosmo and Laura Malaguzzi Valeri

Energy Economics, 2014, vol. 43, issue C, 306-315

Abstract: In a deregulated market, the decision to add generation rests with private investors. This paper evaluates how generator profits are affected by increasing wind generation. Using hourly historical data for the Irish Single Electricity Market, we simulate new series of electricity prices, representative plant bids and wind generation. We calibrate the model based on the negative correlation between electricity prices and wind generation. This allows us to determine that increasing wind generation induces lower profits for all baseload plants. Additionally, it decreases profits for baseload natural gas plants more than for less flexible coal-fuelled plants, which might encourage investment in less flexible plants.

Keywords: Electricity; Generation incentives; Simulation; Wind generation; Ireland (search for similar items in EconPapers)
JEL-codes: C15 L94 Q40 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (18)

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Related works:
Working Paper: The Incentive to Invest in Thermal Plants in the Presence of Wind Generation (2014)
Working Paper: The Incentive to Invest in Thermal Plants in the Presence of Wind Generation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:43:y:2014:i:c:p:306-315

DOI: 10.1016/j.eneco.2014.03.009

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