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Integrating Wind Power in Electricity Grids: An Economic Analysis

Jia Liu, Gerrit van Kooten and Lawrence Pitt

No 2005-02, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: As a renewable energy source, wind power is gaining popularity as a favoured alternative to fossil fuel, nuclear and hydro power generation. In Europe, countries are required to achieve 15% of their energy consumption from wind by 2010 as the EU strives to meet its Kyoto obligations. Wind power is considered to be environmentally friendly and low cost. While environmental friendliness has come under scrutiny because wind turbines continue to pose a hazard to birds, are visually unappealing, affect the uses of land and change air flows, the purpose of this paper is to examine the question of its presumed low cost and effectiveness atreducing CO2 emissions by replacing power generated from fossil fuels. To do so, we develop a mathematical programming model of an electrical energy grid that employs power generated by a base-load nuclear power plant, a coal-fired power plant and a gas facility, with the latter used primarily to meet peak-load demand. We then introduce varying levels of wind power generating capacity into the grid. The results indicate that, at low levels of penetration, wind power can provide CO2 mitigation benefits at low cost. However, as the degree of penetrability increases, the costs of reducing CO2 emissions rise rapidly because of the spinning reserves required in the coal- and gas-fired power plants. Fossil fuels are consumed even though no power is generated in the eventuality that wind power is suddenly unavailable. The whimsical nature of wind energy makes it a less than desirable long-term source of energy.

Keywords: renewable energy; wind and nuclear power; economics of power generation (search for similar items in EconPapers)
JEL-codes: C61 Q40 Q54 Q55 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-06
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