Large Scale Wind Power Investments Impact on Wholesale Electricity - PowerPoint PPT Presentation

Large Scale Wind Power Investment’s Impact on Wholesale Electricity Market Ömer Karaduman MIT Economics, Stanford Bits & Watts Contact: omerk@mit.edu https://www.dropbox.com/s/ho5m3878mnzcztf/WoodNov10_karaduman.mp4?dl=0 For attendees: during review of the presentation, please direct comments to the presenter by using “@PresenterName”. This will ensure they receive your comments and questions directly.

Introduction Producing clean electricity is important for decarbonization, accounts for 1/4 of overall CO2 emissions in the US (EIA 2016) Renewables are key for the power system transition • Emission free • Not dispatchable, intermittent • High installment, almost -zero marginal cost

Objective Impact of Large Scale Renewable Generation on Electricity Markets? – Emissions – Revenue of existing generators (Retirement) – Revenue of the new investment (Entry) – Market Power

Methods I build a structural equilibrium framework to quantify a hypothetical large scale renewable generation’s impact on a wholesale electricity market in short-run – endogenize the price impact by allowing incumbent firms’ response – calculate supply function equilibrium (SFE) I compute a SFE using estimated best responses to observed variation in demand level Applied to South Australia, where wind penetration level is around 50%

Results for Wind Generation in South Australia Marginal analysis’s bias increases as the size of the investment increases ● Lots of curtailment, wind cannot replace all emissions by itself ● Trade does the heavy lifting for the overall emission impact ● The revenue impact shifts from low-cost inflexible generators to high-cost flexible ● generators, as the capacity of wind power increases The revenue impact is the highest on existing renewable generation ●

Conclusions A model to quantify large- scale renewables investment’s impact in ● wholesale electricity market, by endogenizing the price effect Offset patterns and the price impact differ considerably as wind ● penetration level is changing

Future work Other ways to use the framework – Solar PV – EV – Demand Participation – Storage (Karaduman JMP 2019) – Modeling the long-run transition • Selection/Entry of projects based on subsidy structure • Retirement based on lost revenue • Implication on reliability/resilience, storage need

Acknowledgments I am deeply grateful to my advisors Nikhil Agarwal, Nancy Rose, Paul Joskow, and Jing Li for their guidance and support. ExxonMobil-MIT Energy fellowship provided valuable support.