Airborne wind energy (AWE) is a new generation of wind energy technology which uses tethered kites to reach the stronger and steadier high altitude wind resource. Research and development of AWE has been accelerated in the last two decades. Around 40 institutions around the world are working on their own concepts and architectures of the technology. This research has been collaborated with Ampyx Power B.V, a Dutch company involved in development of one of the concepts of AWE. No company has yet been able to prove the commercial viability of their technology. A successful market diffusion is possible when there is a perfect product market fit i.e. the technology development should be aligned with the market requirements. Economies of scale and maturing of technology is continuously reducing the cost of utility scale variable renewable energy sources (VRES) like wind and solar PV. Anticipating a subsidy free future, utility scale VRES will be dependent on the day-ahead electricity market (DAM) for their revenue generation. The electricity prices from the market are dynamic and are dependent on the supply and demand characteristics of the country. Higher influx of VRES in the grid depress the DAM prices, this effect is known as the merit-order effect of VRES. Therefore, the value of electricity depends on the time at which it is produced. This indicates to investigate if there is a need to shift from cost driven system design to value driven system design for VRES.

Energy production and revenue generation of AWE at a certain time, depends on the wind speed and the energy price at that particular time. A data driven statistical model has been developed in MATLAB environment to identify and quantify the merit order effect of wind power by estimating the correlation of DAM prices and wind speeds. A decision support tool for the system design of AWE is developed by integrating the correlation model with a revenue model and the existing cost model of Ampyx Power. Correlation model results for different locations in Europe confirms that there exists a negative correlation between the DAM prices and wind speeds. Among the tested locations, the German DAM prices drop by around 1.2€/MWh, the Danish by around 0.9€/MWh, and the Dutch by around 0.6€/MWh per 1m/s increase in wind speed. Different locations in different European markets have different strengths of the correlation depending on their wind climate and their energy mix. A case study based on three different locations in Germany has been analyzed using the developed tool to understand the influence of the merit order effect on the system design of AWE. The results show that in a DAM based revenue generation scenario, value driven optimization leads to a different system configuration than cost driven optimization. It leads to systems which perform better at lower wind speeds.