Integration of wind power in the electricity market: A business case evaluation

Mohamed Mostafa and Kai Rommel

ISM Research Journal, 2014, vol. 1, issue 1, 27-46

Abstract: The legal and economic frameworks have passed through a set of development cycles in order to adjust market rules to the development of the share of renewables (RES) in the electricity generation. The latest version of the German Renewable Energy Law (EEG ) requires the RES power to be introduced into the electricity market through the Transmission System Operator (TSO) – "indirect selling", or to be sold directly into the market by the plant, instead of receiving the fixed feed-in tariff – "direct selling". In this paper, these aspects of integrating RES legally, economically and its operation will be addressed more detailed. Direct selling of RES power on the electricity market has the major advantage of enabling the integration of the RES after the expiration of the feed-in periods of 20 years. Furthermore, it helps the electricity community to develop the required experience dealing with RES in a competitive market without relying on the feed-in umbrella. The electricity market setup and -rules were designed for planned fossil power plants and not for fluctuating generation like wind generators, therefore the realization of direct selling of wind power is expected to be challenging. One major challenge, beside its fluctuating nature, is the limited predictability of wind power generation. In this paper, a business case will be evaluated to investigate the economic feasibility of direct selling of wind power in the current market structure. The evaluation will rely on the newly issued Act EEG 2012 and the market data of the year 2010. With the use of a Monte Carlo Simulations we evaluate a medium sized wind park case and reveal differences in revenues between direct selling and feed-in tariffs. In most cases, direct selling provides comparably higher revenues. However, the use of sufficient measures to increase forecast quality represents a substantial precondition. Chapter 1 describes the legal framework for wind power trading. In chapter 2 we explain the business case evaluation, including the data preparation and the analysis of wind power without and with reserve capacity. Chapter 3 gives a summary and an outlook into the future.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ismrjl:324676

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