Renewable Electric Energy Integration: Quantifying the Value of Design of Markets for International Transmission Capacity

49 Pages Posted: 29 Oct 2011

See all articles by Karsten Neuhoff

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

Rodney Boyd

affiliation not provided to SSRN

Thilo Grau

German Institute for Economic Research (DIW Berlin)

Julian Barquin

Comillas Pontifical University

Francisco Echavarren

affiliation not provided to SSRN

Janusz Bialek

affiliation not provided to SSRN

Chris Dent

affiliation not provided to SSRN

Christian von Hirschhausen

German Institute for Economic Research (DIW Berlin) - Department of International Economics

Benjamin F. Hobbs

Johns Hopkins University

Friedrich Kunz

German Institute for Economic Research (DIW Berlin)

Hannes Weigt

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel

Christian Nabe

Ecofys

Georgios Papaefthymiou

affiliation not provided to SSRN

Christoph Weber

University of Duisburg-Essen

Date Written: October 1, 2011

Abstract

Integrating large quantities of supply-driven renewable electricity generation remains a political and operational challenge. One of the main obstacles in Europe to installing at least 200 GWs of power from variable renewable sources is how to deal with the insufficient network capacity and the congestion that will result from new flow patterns. We model the current methodology for controlling congestion at international borders and compare its results, under varying penetrations of wind power, with a model that simulates an integrated European network that utilises nodal/localised marginal pricing. The nodal pricing simulations illustrate that congestion - and price - patterns vary considerably between wind scenarios and within countries, and that a nodal price regime could make fuller use of existing EU network capacity, introducing substantial operational cost savings and reducing marginal power prices in the majority of European countries.

Keywords: Power market design, renewable power integration, congestion management, transmission economics

Suggested Citation

Neuhoff, Karsten and Boyd, Rodney and Grau, Thilo and Barquin, Julian and Echavarren, Francisco and Bialek, Janusz and Dent, Chris and von Hirschhausen, Christian and Hobbs, Benjamin F. and Kunz, Friedrich and Weigt, Hannes and Nabe, Christian and Papaefthymiou, Georgios and Weber, Christoph, Renewable Electric Energy Integration: Quantifying the Value of Design of Markets for International Transmission Capacity (October 1, 2011). DIW Berlin Discussion Paper No. 1166, Available at SSRN: https://ssrn.com/abstract=1950595 or http://dx.doi.org/10.2139/ssrn.1950595

Karsten Neuhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Rodney Boyd

affiliation not provided to SSRN ( email )

Thilo Grau

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Julian Barquin

Comillas Pontifical University

Madrid
Spain

Francisco Echavarren

affiliation not provided to SSRN ( email )

Janusz Bialek

affiliation not provided to SSRN ( email )

Chris Dent

affiliation not provided to SSRN ( email )

Christian Von Hirschhausen

German Institute for Economic Research (DIW Berlin) - Department of International Economics ( email )

Mohrenstraße 58
Berlin, 10117
Germany
+49-30-89789-343 (Phone)
+49/30/897 89 -200 (Fax)

Benjamin F. Hobbs

Johns Hopkins University ( email )

Whiting School of Engineering
Baltimore, MD 21218
United States
410 516-4681 (Phone)
410 516-8996 (Fax)

Friedrich Kunz

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Hannes Weigt

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel ( email )

Basel, 4051
Switzerland

HOME PAGE: http://fonew.unibas.ch/

Christian Nabe

Ecofys ( email )

Stadsplateau 2
3526 KL
Utrecht, 3521 AZ
Netherlands

Georgios Papaefthymiou

affiliation not provided to SSRN ( email )

Christoph Weber

University of Duisburg-Essen ( email )

Universitätsstraße 2
Essen, 45141
Germany

HOME PAGE: http://www.ewl.wiwi.uni-due.de

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