Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ekd/004912/5488.html
   My bibliography  Save this paper

Estimating the Value of Additional Wind and Transmission Capacity in the Rocky Mountain West

Author

Listed:
  • Roger Coupal
  • Robert Godby
  • Greg Torell
Abstract
The expansion of wind generation in the United States poses significant challenges to policymakers. Of primary concern is how to optimally incorporate wind in the existing electricity-grid while maintaining power supply at low cost and high reliability. On the supply side, adding generation with the unique characteristics of wind power to the grid presents significant reliability and cost challenges. Wind's intermittency and unpredictability makes scheduling electricity sources in a reliable but efficient way challenging since electricity cannot be stored. To ensure reliability, backstop sources can be added to the grid for use when wind availability is low, but these large fixed capital investments are costly and using them primarily as a backstop ensures lower capital return and higher system costs than when the same technologies are used as primary generators. Transmission capacity and network congestion also limit wind development efforts. Location of wind resources often require new transmission capacity to deliver power to market. Without such capacity wind resources are restricted in their export potential, reducing the return to investment and welfare benefits of such renewable generation facilities. Wind's intermittency can also exacerbate problems of congestion on a transmission constrained grid. On the demand side, electricity demand is unresponsive to cost change, lacking both the information to react to cost conditions and the short-run flexibility with respect to power-use to meaningfully change an inelastic demand. Optimal policy-making with respect to development of wind energy and transmission resources requires some estimate of their costs and benefits, recognizing the stochastic nature of wind resources and transmission constraints on the dynamics of grid electricity cost. This requires a modeling framework that mimics the special nature of electricity markets. This paper attempts to inform such policy concerns by using a recursive optimization simulation model to estimate levels of generation across the two-state region and spanning seasonal variations. A dispatch model incorporates the stochastic aspects of wind generation on a grid with line loss and transmission constraints to estimate the value of additional transmission facilities and expanded wind resources in the Rocky Mountain region of the United States. The simulation model is used to estimate the value of newly built wind resources and planned transmission facilities in the Rocky Mountain Power Area (which includes the state of Colorado, along with most of Wyoming and portions of South Dakota and Nebraska). Price and welfare changes are estimated in these areas as new transmission and wind generation capacity is added to the system. The dispatch model is imbedded in a computable general equilibrium (CGE) model to estimate broader sectoral impacts and regional welfare changes. to estimate economy-wide production, employment, income, and welfare effects. Initial results indicate that the price effects caused by changes in power output at intermittent sources are strongly dependent on the demand conditions and the presence of market distortions caused by the transmission constraints. The peculiarity inherent in electric grid operation can generate responses to policies and congestion that are not always intuitive at the outset. The distribution of the rents accruing to wind generation, particularly in unexpectedly windy periods are strongly dependent on the allocation of transmission rights especially when congestion occurs, which impacts potential returns to developing wind resources. Incidents of congestion depend on the pace of development of transmission capacity. Not accounting for such distortions unique to the electricity grid may cause new development to worsen market outcomes in one region relative to another if mistaken estimates of benefits or costs lead to sub-optimal future development of wind and transmission facilities. Note from admin: see above Note from admin: see above

Suggested Citation

  • Roger Coupal & Robert Godby & Greg Torell, 2013. "Estimating the Value of Additional Wind and Transmission Capacity in the Rocky Mountain West," EcoMod2013 5488, EcoMod.
    • Handle: RePEc:ekd:004912:5488
    as

    Download full text from publisher

    File URL: http://ecomod.net/system/files/Transmission%20congestion%20and%20renewable%20energy%206-7_13.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
    2. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lauren Knapp & Jacob Ladenburg, 2015. "How Spatial Relationships Influence Economic Preferences for Wind Power—A Review," Energies, MDPI, vol. 8(6), pages 1-25, June.
    2. Harrison Fell & Daniel T. Kaffine, 2014. "A one-two punch: Joint effects of natural gas abundance and renewables on coal-fired power plants," Working Papers 2014-10, Colorado School of Mines, Division of Economics and Business.
    3. Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "The impact of the North Atlantic Oscillation on electricity markets: A case study on Ireland," Energy Economics, Elsevier, vol. 58(C), pages 186-198.
    4. Lynch & John Curtis, 2016. "The effects of wind generation capacity on electricity prices and generation costs: a Monte Carlo analysis," Applied Economics, Taylor & Francis Journals, vol. 48(2), pages 133-151, January.
    5. Brown, Jason P. & Coupal, Roger & Hitaj, Claudia & Kelsey, Timothy W. & Krannich, Richard S. & Xiarchos, Irene M., 2017. "New Dynamics in Fossil Fuel and Renewable Energy for Rural America," USDA Miscellaneous 260676, United States Department of Agriculture.
    6. Oliver, Matthew E., 2015. "Economies of scale and scope in expansion of the U.S. natural gas pipeline network," Energy Economics, Elsevier, vol. 52(PB), pages 265-276.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blázquez De Paz, Mario, 2017. "Production or Transmission Investments? A Comparative Analysis," Working Paper Series 1158, Research Institute of Industrial Economics.
    2. Susanne Koschker & Dominik Möst, 2016. "Perfect competition vs. strategic behaviour models to derive electricity prices and the influence of renewables on market power," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(3), pages 661-686, July.
    3. Green, Richard, 2010. "Are the British electricity trading and transmission arrangements future-proof?," Utilities Policy, Elsevier, vol. 18(4), pages 186-194, December.
    4. David M. Newbery, 2012. "Reforming Competitive Electricity Markets to Meet Environmental Targets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    5. Shahmohammadi, Ali & Sioshansi, Ramteen & Conejo, Antonio J. & Afsharnia, Saeed, 2018. "Market equilibria and interactions between strategic generation, wind, and storage," Applied Energy, Elsevier, vol. 220(C), pages 876-892.
    6. Feuerriegel, Stefan & Neumann, Dirk, 2014. "Measuring the financial impact of demand response for electricity retailers," Energy Policy, Elsevier, vol. 65(C), pages 359-368.
    7. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    8. Fürsch, Michaela & Hagspiel, Simeon & Jägemann, Cosima & Nagl, Stephan & Lindenberger, Dietmar & Tröster, Eckehard, 2013. "The role of grid extensions in a cost-efficient transformation of the European electricity system until 2050," Applied Energy, Elsevier, vol. 104(C), pages 642-652.
    9. Frank A. Wolak, 2016. "Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California," NBER Working Papers 22494, National Bureau of Economic Research, Inc.
    10. Newbery, David & Strbac, Goran & Viehoff, Ivan, 2016. "The benefits of integrating European electricity markets," Energy Policy, Elsevier, vol. 94(C), pages 253-263.
    11. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Agent-based models and economic policy," Post-Print hal-03461120, HAL.
    12. Newbery, David, 2018. "Policies for decarbonizing a liberalized power sector," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-24.
    13. Grimm, Veronika & Schewe, Lars & Schmidt, Martin & Zöttl, Gregor, 2017. "Uniqueness of market equilibrium on a network: A peak-load pricing approach," European Journal of Operational Research, Elsevier, vol. 261(3), pages 971-983.
    14. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.
    15. Rubin, Ofir D. & Babcock, Bruce A., 2013. "The impact of expansion of wind power capacity and pricing methods on the efficiency of deregulated electricity markets," Energy, Elsevier, vol. 59(C), pages 676-688.
    16. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    17. Winkler, Jenny & Gaio, Alberto & Pfluger, Benjamin & Ragwitz, Mario, 2016. "Impact of renewables on electricity markets – Do support schemes matter?," Energy Policy, Elsevier, vol. 93(C), pages 157-167.
    18. Browne, Oliver & Poletti, Stephen & Young, David, 2015. "How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?," Energy Policy, Elsevier, vol. 87(C), pages 17-27.
    19. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    20. Pahle, Michael & Schill, Wolf-Peter & Gambardella, Christian & Tietjen, Oliver, 2016. "Renewable Energy Support, Negative Prices, and Real-time Pricing," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37, pages 147-169.

    More about this item

    Keywords

    Rocky Mountain region; Energy and environmental policy; General equilibrium modeling (CGE);
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ekd:004912:5488. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Theresa Leary (email available below). General contact details of provider: https://edirc.repec.org/data/ecomoea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.