Economic and environmental impact assessment of policies promoting wind power participation in energy spot markets.

Abstract

This master thesis aims at improving the understanding of the factors affecting the cost and emission impacts of wind operations using an engineering- economic (unit commitment) model and generator performance data based on actual US and other country experience, and to analyze the impact of incentive mechanisms on wind power participation in electricity spot markets. The main research question that is answered is the following: What is the effect on emissions and total system costs due to the increased cycling and startup behavior of conventional fossil fuel generators if wind penetration increases due to policy mechanisms that incentivize wind generation? And what is the behavior of these emission- and cost curves? The methodology used for answering this research question consists of two main parts. First, a statistical analysis of available data of fuel consumption and emissions from the EPA’s CEMS1 database is performed in order to 1) verify if these factors are influenced by increased cycling and 2) to obtain up-to-date parameters which are then implemented in a unit commitment model. The development of this model is the second part of the methodology. The main aspects of this model are the detailed modeling of generator startups and the assignment of a cost associated with wind power curtailment- referred to as the curtailment cost-, which can also be seen as an incentive mechanism (or subsidy) to dispatch wind generation in the system. Consequently four different scenarios with a different generation mix and flexibility are composed by combining the analyzed generators in the data analysis. The unit commitment model has been run for all of these scenarios for different values of curtailment costs. The influence of varying this cost on the amount of wind curtailment, the amount of startups, the total system cost and its components, total CO2 emissions, electricity prices and profits for wind and conventional generators has been analyzed. No dependency of marginal fuel consumption on the generation output or ramping of the generator has been observed in the analyzed data, which is a remarkable result in contradiction with recent research. A possible explanation is the hourly time step of the analyzed data. The main conclusions of this master thesis are the following. First, total system costs increase when the cost associated with wind power curtailment increases (or when the subsidy for wind power increases) due to the increased cost of startups and cycling of conventional generators at higher wind penetration. The increase in costs depends on the generation mix of the system. Second, the impact of increasing the curtailment cost on CO2 emissions is heavily dependent upon the generation mix and flexibility of the system. The more inflexible and polluting the generation mix, the stronger the increase in emissions due to the cycling of power plants at higher wind penetration. Very flexible (gas) systems show even a decrease in emissions. However, costs and emission changes are small for a considerable cost associated with wind curtailment in the generation dispatch.