Economic Value Approach to Intermittent Power Generation in the Nordic Power Markets

Maria Kopsakangas-Savolainen and Rauli Svento

Energy and Environment Research, 2013, vol. 3, issue 2, 139

Abstract: The key elements in solving the increasing problems of power generation are to develop a sustainable and efficient production system and to utilize consumer management and demand response in a clearly stronger way than have been recently done. A significant part of the renewable energy (wind and solar) differs from most conventional (fossil fuel and nuclear) generating technologies such that they produce electricity intermittently and are not dispatchable. If traditional levelized cost approach is used it gives inappropriate and misleading results. In this paper we utilize a long-run oriented Real-Time Price based model to analyze the economic value of intermittent electricity generation in the Nordic power markets. Using this type of model it is possible to simultaneously take into account the increasing role of demand response and the specific characteristics of intermittent technology. We study the impacts of a change in production profile and increase in the share of intermittent generation to the market prices, equilibrium of other capacities, production costs, profits and CO2 emissions. Our approach which uses hourly output profiles and associated market value of electricity, gives plausible economic values for electricity.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:eerjnl:v:3:y:2013:i:2:p:139

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