Xiaoyi Mu and Hanchen Xiaoyi
University of Dundee, UK
This paper studies the intra-day impacts of wind power on wholesale electricity prices and conventional generation in the UK. Exploiting the variations by hour across years from 2008 to 2019, we differentiate the longer-term impact of wind power that is largely due to capacity increases and the short-run impact that is primarily driven by weather conditions. The result shows that while the expansion in wind energy significantly decreases the electricity price during peak hours from 10:00 to 20:30, it has no significant effect or even increases the electricity price during early morning shoulder hours. We also estimate the substitutional effect of wind energy on conventional generation technologies. Wind generation is found to displace coal, CCGT and oil generation during peak hours. Consequently, this leads to reductions in CO2 emissions. Our results also suggest that wind power expansion could enhance the economic viability of more flexible generation technologies, while undermining traditional based load units such as CCGT. In addition, we also estimate the effect of carbon pricing on electricity prices.
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