Wind energy Can Mitigate market power Academic Article uri icon

abstract

  • A rich body of literature suggests that there is an inverse relationship between wind power penetration rate and electricity market prices, yet it is unclear whether these observations are generalizable. Therefore, in this paper we seek to characterize analytically market conditions that give rise to this inverse relationship. To this purpose, we expand a theoretical framework to facilitate flexibility in modelling the structure of the electric industry with respect to the degree of market concentration and diversification in the ownership of wind power capacity. The analytical results and their attendant numerical illustrations indicate that it is not always that wind energy depresses electricity prices. This is likely to occur when the number of firms is large enough, the ownership of wind energy is sufficiently diversified, or most often a combination of the two. Importantly, our study defines the circumstances in …

publication date

  • January 1, 2014