Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2013/1: Now or Later? Trading wind power closer to real-time and how poorly designed subsidies lead to higher balancing costs

Johannes Mauritzen ()
Additional contact information
Johannes Mauritzen: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

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 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 rollingwindow regression to support this claim.

Keywords: Deregulated electricity markets; intermittent generation; wind power

JEL-codes: Q42; Q48

22 pages, April 25, 2013

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