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Blowing in the Wind: Vanishing Payoffs of a Tolling Agreement for Natural-gas-fired Generation of Electricity in Texas

Chi-Keung Woo, Ira Horowitz, Brian Horii, Ren Orans, and Jay Zarnikau
Authors registered in the RePEc Author Service: Jay Zarnikau () and Chi-Keung Woo

The Energy Journal, 2012, vol. Volume 33, issue Number 1

Abstract: We use a large Texas database to quantify the effect of rising wind generation on the payoffs of a tolling agreement for natural-gas-fired generation of electricity. We find that while a 20% increase in wind generation may not have a statistically-significant effect, a 40% increase can reduce the agreement's average payoff by 8% to 13%. Since natural-gas-fired generation is necessary for integrating large amounts of intermittent wind energy into an electric grid, our finding contributes to the policy debate of capacity adequacy and system reliability in a restructured electricity market that will see large-scale wind-generation development.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2012
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