It is windy in Denmark: Does market integration suffer?

Nuno Carvalho Figueiredo, Patricia Silva () and Pedro Cerqueira

Energy, 2016, vol. 115, issue P2, 1385-1399

Abstract: Some benefits of spot electricity markets integration include the optimization of renewable power, increasing transmission grid security and the decreasing need for internal generation reserves. The high penetration of wind power is known to have a clear influence on price convergence between electricity markets joined by market splitting. However, in multiple interconnected markets, cross-border flows can also play a role in the market splitting behaviour. Denmark, with a high penetration of wind power, is clearly the ideal case study. This paper aims to assess the influence of high penetration of wind power on the market splitting behaviour between West and East Denmark, taking into account cross-border electricity flows. This is modelled through logit and non-parametric models, estimating the probability of market splitting occurrence between both Danish bidding areas. Market splitting probability is found to be sensitive to wind power, nevertheless with distinct behaviour according to interconnection congestion configuration. The highest availability of wind power in West Denmark, which can reach a generation share of 1.5 times the demand, requires strong cross-border interconnections to allow the export of the excess generation. Policies governing a joint assessment of the requirements for additional interconnection and wind power expansion plans, should be developed.

Keywords: Market splitting; Renewable energy; Non-parametric models (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:115:y:2016:i:p2:p:1385-1399

DOI: 10.1016/j.energy.2016.05.038

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