Assessing the impact of wind generation on wholesale prices and generator dispatch in the Australian National Electricity Market

Sam Forrest and Iain MacGill

Energy Policy, 2013, vol. 59, issue C, 120-132

Abstract: Growing climate change and energy security concerns are driving major wind energy deployment in electricity industries around the world. Despite its many advantages, growing penetrations of this highly variable and somewhat unpredictable energy source pose new challenges for electricity industry operation. One issue receiving growing attention is the so-called ‘merit order effect’ of wind generation in wholesale electricity markets. Wind has very low operating costs and therefore tends to displace higher cost conventional generation from market dispatch, reducing both wholesale prices and conventional plant outputs. This paper extends the current literature on this effect through an empirical study employing a range of econometric techniques to quantify the impacts of growing wind penetrations in the Australian National Electricity Market (NEM). The results suggest that wind is having a marked impact on spot market prices and, while wind is primarily offsetting higher operating cost gas generation, it is now also significantly reducing dispatch of emissions intensive brown coal generation. Great care needs to be taken in extrapolating these results to longer-term implications, however, the study does propose a methodology for assessing this effect, highlights the impacts that wind is already having on NEM outcomes and suggests promising directions for future research.

Keywords: Wind integration; Electricity market; Merit order (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (89)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421513001110
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:59:y:2013:i:c:p:120-132

DOI: 10.1016/j.enpol.2013.02.026

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().