Working Paper Series
Now or Later? Trading Wind Power Closer to Real-time and How Poorly Designed Subsidies Lead to Higher Balancing Costs
Abstract: An important challenge facing many deregulated electricity
markets is dealing with the increasing penetration of intermittent
generation. Simulation studies have pointed to the advantages of trading
closer to real-time with large amounts of intermittent generation. Using
Danish data, I show that, as expected, shortfalls increase the probability
of trade on the shortterm market. But in the period studied between 2010
and 2012 surpluses are shown to decrease the probability of trade. This
unexpected result is likely explained by wind power policies that
discourages trading on Elbas and leads to unnecessarily high balancing
costs. I use a rolling-windows regression to support this claim.
Keywords: Wind power; Short-term markets; Forecasting error; (follow links to similar papers)
JEL-Codes: Q42; Q48; (follow links to similar papers)
23 pages, July 1, 2013
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