Balancing Costs for Wind Power
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- Institutt for elkraftteknikk 
Nordel is the organisation for the Nordel synchronous system, held by the Nordic Transmission System Operators. In their work to harmonise the Nordic electricity markets they have agreed upon harmonising the Nordic balance management. This will imply three large changes, firstly the settlement of the production balance will be done by a 2-price settlement, (instead of the 1-price settlement in Norway), and secondly there will be a new intraday market for settling the balances after 12- 36 hours and before operating time. Finally the Balance Responsible Parties will have to take their share of the costs for operating the reserves. Paying a penalty through paying more in the regulating market than in the spot market is meant as an incentive for the market to maintain their power balance. This will help the system operator reduce their need to contract and use reserve power and consequently reducing total costs. These new regulations will reduce the net income from producers of wind and other power plants that cannot control their production, like run of river hydro power plants. The market for electricity is currently divided into three consecutive markets. Nord Pool fixes the price the day ahead of operation, followed by the intra-day market Elbas (not in Norway), where power is traded up to one hour before operation, and lastly, the balancing market which helps maintain the balance in the operational hour and settles the costs afterwards. The costs of balancing wind power production in the balancing market (1- price and 2-price) are analysed. Wind series from three Norwegian wind parks have been nominated to the spot market and the deviation settled in the balancing market, by the 1-price settlement as reference and the 2-price settlement. The nominations have been done to three different years; 2004, 2005 and 2006 in Norway, and park A is nominated to 2006 in Sweden and Denmark. It is assumed that the wind power production and the spot and regulating prices are independent of each-other. The resulting change in income with deviation compared to making no prediction error for a 100 MW wind farm is presented. The highest loss compared to making no prediction error is when making a common bid for park A and B (11 677 000 in 2006), followed by the common bid for park A+B with wind series from the second year(8 555 000 in 2006) and park A (7 733 000 in 2006) in Denmark. One of the best ways to integrate large amounts of wind energy is to improve the forecasting methods. In that way the production planning will go easier, and deviations and corresponding costs are reduced. The savings achieved by introducing a prediction tool equals 3 523 000, 4 122 000, 4 921 000 compared to the base case of the corresponding MAEs equal to 39%,30% and 18%. The smoothing effect emerges when nominating geographically spread parks in a group(Holtinnen, 2005). Three parks, that are separated by several 100 km, are nominated by a single BRP. The resulting costs compared to separate nominations are reduced by 31,5 %. This result requires that the wind farms is in the same price area, which they in this case does not. The result is interesting nevertheless as Nordel continuously seek to to invest in transmission capacity in order to create an efficient Nordic market for electricity. The Elbas market is mainly a market to reduce risks. If a deviation should occur it is likely that the best way for balancing it, will be in the regulating market. This is due to the principle of the merit order, which implies that the cheapest regulating power offered is used first. By comparing the data there were quite a few hours were the middle Elbas price was higher than the regulating price. In this sense it might have been wise to wait, although the lower regulating price may also have been a result of more energy being settled in the Elbas market, reducing the volume needed to be settled in the regulating market, and accordingly reducing the price.