50 pct. Wind Power in Denmark and Power ... - Ea Energianalyse

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NORDIC WIND POWER CONFERENCE, NWPC’2007, 1-2 NOVEMBER 2007, ROSKILDE, DENMARK 8Currently in the Danish system, there are two options toensure balancing with respect to this uncertainty. Thebalancing task can be left to the system operator,Energinet.dk, or it can be handled privately. Energinet.dkcharge a balancing tariff, currently 23 DKK/MWh fed intothe system. This is used to finance the purchase of balancingpower from other generators in the system. This price isdriven by the average price on balancing power and theaverage prediction error of wind power between submittingbids to the spot market and the hour of operation. The levelof the balancing costs in 2005-2006 was 30 DKK/MWh forEastern Denmark [2] and the average prediction error hasbeen estimated to be 35% when the bid is given 13-36 hoursbefore the hour of operation as it is today in the Nordpoolmarket [2].Since wind power is increased from now until 2025 in thesimulation it has been chosen to use an increasing cost ofbalancing from 20 DKK/MWh to 40 DKK/MWh in 2025.This is founded on a number of assumptions.- Market development, especially the active use of theNordic intraday market Elbas, will increase until2025, hence put pressure on the price of regulatingpower.- Balancing power trade will expand internationally.Balancing Danish wind power with Nordic hydropower for instance.- Improvements in wind power forecasting methodsand or changes in market design to betteraccommodate wind power (i.e. by moving spot bidscloser to the hour of operation). It is assumed thatthe average error in prediction will decrease to 25%.(This assumption means that the cost of balancing ingeneral is assumed to increase to 160 DKK/MWh in2025, thus giving a cost for balancing wind powerof 40 DKK/MWh).With respect to wind power generation forecasts it is alsoimportant to note that with increased wind powercompetition between forecasting methods is intensified. Thisadds robustness to the forecasts as different wind powergenerators will use different forecasting methods, thusdiversifying the effects of unavoidable systemic errors inforecast methods.7.1. Evaluating the capacity value of wind powerAs mentioned above the intermittent nature of wind poweris implicitly included in the model calculations. The capacityvalue of wind power can be evaluated from the modelresults.The term capacity value is used to express the value ofgeneration to the electricity system. Basically this is aquestion of timing: plants which are able to adjust theirproduction according to the system demand have a highvalue whereas intermittent technologies such as wind powerwould usually have a lower value.There are several ways to assess the capacity value of anelectricity production technology. In a well developedelectricity market, the value of the electricity production canbe assessed as the price a technology may obtain in theelectricity market. In the Nordic market there is no separatecapacity value payment and it can thus be assumed that thespot price in the mature electricity market reflects the realvalue of electricity production (energy and capacity value)hour by hour. In other studies, the capacity value has beenassessed in different ways – for instance for wind power, ithas been estimated what the extra investment will be forsufficient backup capacity for periods without wind.Based on an evaluation of the value of wind powerelectricity in the market Ea Energy Analyses have previouslyestimated the capacity value of wind power to be 20DKK/MWh [16].A UKERC [17] report estimates the costs to maintainsystem reliability to be 37 – 60 DKK/MWh under Britishconditions. IEA [6] refers to the ILEX [18] study and theGreen-net study [19] and estimates the capacity costs of windpower to be between 22 and 50 DKK/MWh.The capacity value is not a constant technology parameter.The value of wind power for the system is very dependent onthe incumbent capacity of the system. In a system with highpenetration of hydropower with reservoirs or with many fastregulating gas turbines, the capacity value for wind powerwill be high, compared to a system with an abundance ofslowly regulating nuclear or coal power.As explained earlier the Balmorel model was used tocalculate a reference scenario based on market driveninvestments and a scenario where a target of 50 pct. windpower was implemented. Furthermore, two scenarios with atarget of 30 pct. and 40 pct. wind power have beencalculated. In order to analyze the capacity value of windpower the table below shows the installed new wind powercapacity in the 3 scenarios as well as the quantity of thermalcapacity replaced by the new wind power capacity.Table 7: Investments in thermal and wind power capacity in the 30 pct., 40pct. and 50 pct wind power scenarios compared to the reference scenario.New investments in windpower capacity (MW)Reduced investment inthermal capacity comparedto the reference scenario(MW)Replaced thermal capacity /new wind power30 pct.wind40 pct.wind50 pct.wind3,589 4,539 5,670943 1,132 1,4590.263 0.249 0.257The model results show that for each MW of wind powerthe investments in thermal plants are reduced by 0.25-0.26MW. In other terms for each MW of wind power 0.75 MWof thermal capacity is required according to the model. In thecase that all this extra capacity is built only to handle theintermittent nature of wind power and ensure that power canbe supplied in every hour also when the wind does notproduce the extra costs can be calculated by calculating theextra capacity costs of the needed thermal capacity.Assuming that the 0.75 MW pr. MW wind is established assingle cycle gas turbines at 3.5 million DKK/MW the yearlycapacity cost of 1 MW off shore wind power will be 73DKK/MWh. However, this will be an upper limit of thecapacity cost related to the wind power since the extra gasturbine capacity can also be used for other purposes in theelectricity market.Another indicator of capacity value is the average MWhpriceawarded to wind power in the market, in comparisonwith the average electricity price and other technologies.
NORDIC WIND POWER CONFERENCE, NWPC’2007, 1-2 NOVEMBER 2007, ROSKILDE, DENMARK 9This is a more relevant indicator in the Nordic market sincethe capacity value is included in the market price (there is noseparate capacity market). The figure below shows theresults of the model calculations. The figure shows thedifference between the yearly average electricity price andthe average price in the market for an efficient existing coalfired plant, an efficient existing biomass fired plant, and landand sea based wind power where the years represent the levelof technological development. Model results for 2025 areshown for the 30%, 40% and 50% wind scenarios.the cost of integrating wind power is lowered. Geographicalspacing of wind power diminishes intermittency issues inwell connected systems.ACKNOWLEDGEMENTThis paper is a result of several projects undertaken by EaEnergy Analyses during the spring of 2007. The Projectswere financed by the Danish Wind Industry Association andthe Danish Environmental Assessment Institute (now underthe Secretariat of the Danish Economic Council). Individualproject publications are referenced below.EfficientcoalplantEfficientbio plant2015 2020 2025Wind land2020 2025Wind seaFigure 12: Model results for 2025. Capacity value of an efficient existingcoal fired plant, an efficient existing biomass fired plant which is similar tothe technology in which is invested, and land and sea based wind powerwhere the years represent the level of technological development (see Figure4).It can be seen that the coal plant gets a price in the marketthat is higher than the average yearly electricity price andthus has a positive capacity value. The average price for thewind power units is lower than the average yearly electricityprice and they therefore have a negative capacity value. Thecapacity value for wind decreases with increasing quantity ofwind in the system.With the coal fired plant as reference the capacity value ofwind power is 10 DKK/MWh in the 30% scenario, 25DKK/MWh in the 40% scenario and 40 DKK/MWh in the50% scenario.8. CONCLUSIONIt is technically feasible to incorporate 50 pct. wind power inthe Danish electricity without reducing the security of supplyin the electricity system. The prerequisite for reaching thetarget with good economy for society is establishment of thenecessary infrastructure, development of a more dynamicelectricity system and an efficient, international marketwhere also the regulation and operational reserves can behandled internationally.Three aspects of wind power integration have beendiscussed. Although many values can be presented, evenfrom the same simulation results, for the capacity value ofwind power, we propose that capacity value of wind powermust be seen in context with the flexibility of the electricitysystem. Methods which relying on calculating “necessary”quantities of back-up capacity, tend to grossly overestimatethe cost of integrating wind power. So called backup capacitycan have multiple sources of revenue. Also, the presence ofwell functioning international power markets, sufficientquantities of international transmission capacities, ensure thatREFERENCES[1] Ravn H et al. Balmorel: a model for analyses of the electricity CHPmarkets in the Baltic Sea Region, 2001. www.balmorel.com[2] Ea Energy Analyses: “50 pct. vindkraft i Danmark i 2025 - en tekniskøkonomiskanalyse”, 2007.[3] Ea Energy Analyses: ”Vindkraftens systemomkostninger”, 2007.[4] Risø: “WILMAR - Wind Power Integration in a Liberalised ElectricityMarket”, Risø 2006[5] Danish Energy Authority: “Basisfremskrivningen til CO 2 -kvoteallokeringsplanen for 2008-12 og regeringens energistrategi: Envisionær dansk energipolitik”, January 2007.[6] IEA: “Projected costs of generating electricity – 2005 update”, 2005.[7] BTM-Consult: “International Wind Energy Development – WorldMarket Up-date 2006 – Forecast 2007-2011”, March 2007[8] Deutsche Energie-Agentur (DENA): “Planning of the Grid Integrationof Wind Energy in Germany Onshore and Offshore up to the Year2020 (DENA Grid study)”, 2005.[9] Danish Energy Authority: “Forudsætninger for samfundsøkonomiskeanalyser på energiområdet, Appendiks”, January, 2007.[10] Nordel: “Wind power in Nordel – system impact for the year 2008”,January 2007.[11] ETSO: “European Wind Integration Study (EWIS) Towards aSuccessful Integration of Wind Power into European ElectricityGrids”, 2007.[12] AEA Technology Environment (2005). Methodology for the Cost-Benefit analysis for CAFE. February 2005.[13] AEA Technology Environment (2005). Damages per tonne emissionof PM2.5, NH3, SO2, NOx and VOCs from each EU25 Member State(excluding Cyprus) and surrounding seas. March 2005.[14] ExternE (2005). Externalities of Energy Methodology, 2005 Update[15] ExternE (1999). National Implementation.Energistyrelsen, ElkraftSystem og Eltra (2005): “Technology Data for Electricity and HeatGenerating Plants (Teknologikataloget)”, March 2005.[16] Ea Energy Analyses: “Elproduktionsomkostninger for nye, danskeanlæg”, 2006[17] UKERC: “The costs and impacts of intermittency: An assessment ofthe evidence on the costs and impacts of intermittent generation on theBritish electricity network”. UK Energy Research Centre, 2006.[18] ILEX: “Quantifying the System Costs of Additional Renewables in2020”. ILEX Energy Consulting & Goran Strbac, Manchester Centerof Electrical Energy, 2002.[19] Green-net: “Guiding a least cost grid integration of RES-electricity inan extended Europe”. Green-net Europe. Hans Auer et al, EnergyEconomics Group, Vienna University of Technology, 2007.
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